Comments on: Chart of the day, free checking edition A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: larue65 Wed, 31 Aug 2011 19:03:08 +0000 While you’re on the topic of subsidies why don’t you tackle the fact that federal credit unions pay zero income taxes while banks do. Think that might result in a little extra cushion to give services away? Think taxing credit unions might pay for a few more services for the truly deprived? Especially since most now have as thier only membership criteria that you live in a particular area? I don’t like NSF fees either and I think they have been abused. However, they hit rich and poor alike. Plenty of poor people don’t overdraw thier accounts, plenty of rich people do. NSF fees target the careless, regardless of economic class. My grandmother has never had an NSF fee in her life. I’ve had plenty. And I’m a lot “richer” than her. And an awful lot of overdrawn accounts are charged off by banks. Isn’t it shocking that people who overdraw thier accounts walk away rather than pay for spending the money they didn’t have? Even if you take away the fees? Who would have thought it? Like I said NSF fees have been abused by the banks but let’s not overdo the poor poor people vs bad rich people talk.

By: y2kurtus Wed, 31 Aug 2011 02:02:45 +0000 Felix “banks have been able to conjure the illusion of free through a system of regressive cross-subsidies, where the poor pay massive overdraft fees and thereby allow the rich to pay nothing.”

As a banker let me PROMISE you that the cross subsidies you refrence flow DOWN the income ladder not up! The “rich” pay the lions share of the cost of all checking services provided by U.S. banks.

If you want to crusade against evil overdraft fees which totaled 35 billion dollars in 2010, by all means sign me up. That’s real money sucked out of the pockets of people who can’t afford to waste it. Lets regulate the snot out of NSF fees!

Just don’t try and tell me that the rich get free services from the financial system. Total system wide deposits stand near 9TRILLION as of 6/30/11. Net interest margin stands around 3.5% so that’s ballpark 315 billion in net interest income. Allocate half that sum to the deposit and half that sum to the loan and we find that deposits generate something like 150 billion dollars in income per year for banks.

So to recap the “poor” defined as those who overdraw their accounts pay 35 billion per year towards the cost of the payments system.

Meanwhile the “rich” defined as those who have money pay 150 billion (by allowing banks to use their money nearly free of charge.)

The people who get a free ride are the ones who have an average checking balance of $1,000 and keep their accounts in good standing while having an average credit card balance of $1,000 but who pay the card off each month and so pay no interest on that $1,000 loan while at the same time receiving the benifit of a rewards program that kicks back 1% of spend.

The simple truth in banking is the poor pay a little, the rich pay a lot and the middle 70% get the free ride. (Well at least the ones who balance their checkbooks!)

By: adambelz Tue, 30 Aug 2011 16:55:25 +0000 You’ll probably still win the bet, but maybe wait until the Durbin Amendment has been in effect for a year. It only went into effect on July 21. So give old Patrick another 11 months to lay down his $100.

By: kenjd Tue, 30 Aug 2011 16:27:33 +0000 I am extremely optimistic that you have a winner here. In my experience, ever more stores are refusing checks, and fewer people seek to write them. Most utilities, credit card companies, etc. actively solicit on-line payment instead of checks. It is possible that the curve of debit card use has been bent, but I am confident that it is still rising, and paper checks declining.

By: TFF Tue, 30 Aug 2011 14:58:05 +0000 I patronize a small bank and can’t imagine why your typical retail customer would do otherwise (unless they happen to prefer credit unions).

Changes? The interest offered on my free checking has dropped to practically zero, so I’ve been rather more aggressive about sweeping spare cash into my online savings account (despite very low interest rates there too). I continue to make weekly deposits at the counter, use little cash, and increasingly rely on a cash-back credit card for payments.

We’ve always refused debit cards. They scare me, as they offer only the weakest fraud protections. Check usage has dropped slightly as more businesses adopt web-based systems that can charge through Paypal.