Loan Sharks

There have been times when I have decided to gamble against the 'powers that be'. I would apply for one of those 0%-interest-for-a-year credit cards. I figure I could hold some of my credit balance there, giving me enough time to pay it down without accruing interest. Its a risky venture, since we all know what can happen: After a year's time, you end up still broke and now your 0% interest has turned into 22%. By the time you are able to transfer balances again (if you even have the option), the credit card company has made more on their part of the gamble than you saved. You: 0. The System: 1.

People have often warned me against trying to play against the system like that. Its not financially wise to gamble in that manner.

However, we all play that game every time we interact with our regular bank. One bounced check At Huntington National Bank recently cost me $34 and change. Plus $7 a day until I had my balance up to zero.

Did it really cost them anything? All they had to do was simply not pay the check, and as long as other banks weren't changing fees, then my bank wouldn't have to, either. I also have to ask: Why do I suddenly have to owe my bank for a debt that is between me and another party?? Its really none of their business. I can't imagine it takes them any longer to process a check returned as "paid" than one returned as "unpaid."

You can (rightly) claim that this is simply (one way) how banks make their money. When you apply for "Totally Free Checking," you are essentially playing against the system no different than if you were applying for a limited-term, low-interest credit card. Banks are making their money. The matter for a gambling man is that you have the chance to beat the system. Or lose drastically.

You could also argue that this is a fair system, in which the vigilant and "responsible" can get away with a free checking system while those who mis-manage their money pay for the rest of us. I find it harder to sympathize with a system based on exploiting the vulnerable. Anyone who has been through some rough spots in life can tell you that even the most vigilant of us can fall onto hard times. And when hard times fall, its not just a downward slide, but rather a decline more akin to exponential proportions. If someone has enough financial problems to the point that they aren't able to pay their debts on time, why in the world do you think they have the financial resources to pay additional fees and penalties on top of that? It can become one hell of a snowball effect. Its uncomfortable to think that the "totally free checking" service taken advantage of by business execs and others well-to-do is a service paid for by single parents and others struggling to keep their heads above water who pay fees when they have the least amount of resources to do so.

I'd rather banks compete. I'll take a checking account with a yearly service fee in lieu of penalties and fees for overdrafts. What would a checking account cost with all fees up front like that, with each participant paying an equal share? How much less would banks make if they had to compete out in the open like that?

ADDED LATER:

Its bad enough that banks are taking my money and investing it for profit without sharing any of that earned interest. Ok, so most of us don't keep much of a balance on our checking accounts, but still, I'm sure the banks use what they got.

In the end, a responsible person needs to do what they need to do to survive. If that means becoming more financially savvy, then that's what needs to be done. But somewhere along with a tough line of personal responsibility should be some compassion, as well. Do we really want a system where those who make mistakes pay the share for the rest of us? It seems like we can do something better than "survival of the fittest". I'm all for people paying for their mistakes and making good on it, but when you consider bank fees, you are looking at someone paying a lot of money to some middle-person (the bank) just because they didn't have their ducks in a row.

We live a society where there is considerable pressure to maximize our consumer spending and our credit. People are responsible for their own decisions, but they are also vulnerable, too, and we can get hit at different stages of our life and education. There are times when you just don't know better. If we were not so vulnerable to this pressure, then the advertising and marketing industries would not be so lucrative. So its a trap: We know people are going to overdraw, and we penalize them when they do.