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Bank of America (BAC) could lose a $480M revenue stream (3% of 2011 earnings), says Matthew...

Bank of America (BAC) could lose a $480M revenue stream (3% of 2011 earnings), says Matthew O'Connor, thanks to expected new rules requiring banks process debit card transactions in the order they occur rather than from largest to smallest. Several big banks have already changed, but BofA - among others - hasn't, and continues to enjoy the easy money.
Comments (25)
  • davidingeorgia
    , contributor
    Comments (2713) | Send Message
     
    And the folks at B of A continue to wonder why almost no one trusts them?
    11 Jul 2012, 07:38 AM Reply Like
  • robgra
    , contributor
    Comments (354) | Send Message
     
    I will never again willingly do business with them.
    11 Jul 2012, 07:55 AM Reply Like
  • bbro
    , contributor
    Comments (9327) | Send Message
     
    Spoken like an Occupy Wall Streeter....
    11 Jul 2012, 07:47 AM Reply Like
  • davidingeorgia
    , contributor
    Comments (2713) | Send Message
     
    LOL! I doubt you intended it that way, but thanks for the early morning laughter. Oh my yes. An Occupy Wall Streeter? LOL. Yes, indeed.
    11 Jul 2012, 07:57 AM Reply Like
  • Pwdrskir
    , contributor
    Comments (135) | Send Message
     
    Or a true Capitalist who makes a choice based on a offerings, product and service.
    11 Jul 2012, 09:03 AM Reply Like
  • MexCom
    , contributor
    Comments (3050) | Send Message
     
    Writing a check with insufficient funds is fraud. Better to prosecute the offenders and permanently kill their accounts - who needs the aggravation. The lost revenue is nothing compared to the saved costs.
    11 Jul 2012, 08:09 AM Reply Like
  • Tricky
    , contributor
    Comments (1583) | Send Message
     
    It's not really a matter of fraud, more of carelessness. Customers who regularly rack up "bounce fees" are amongst a bank's most profitable retail segments.
    11 Jul 2012, 08:59 AM Reply Like
  • PeterScriabin
    , contributor
    Comments (189) | Send Message
     
    I followed all the links SA offered and am still no clearer how the order of processing affects the Banks' incomes, in particular how customers are hurt.

     

    Since davidingeorgia and robgra are clearly butt-hurt about it, perhaps they (or someone else) can explain? Thanks...
    11 Jul 2012, 08:20 AM Reply Like
  • Netrilix
    , contributor
    Comments (2) | Send Message
     
    Essentially it comes down to overdraft fees. If a bank account has $200 in it, and the bank receives charges in the order $20, $25, and $210 they would presumably charge the first two charges first, bringing the account to $155, and then imposing a single ~$35 overdraft fee when the $210 is drawn.

     

    Bank of America would hold all three charges, and then process them in order from highest value to lowest value. Now the $210 is drawn first, knocking the account negative immediately and incurring a ~$35 overdraft fee on the first transaction AND two more overdraft fees for the $25 and $20 transactions since the account is already negative. This allows BAC to collect $105 in overdraft fees in the same situation that other banks would only collect $35.

     

    BAC and many consumers feel this is fair because the person is being heavily penalized for spending money they don't have, while other consumers equate the multiple overdrafts to kicking someone while they're down, especially with the bank deliberately changing the order of charges to maximize the penalty.

     

    Either way, the moral of the story is "Don't Overdraft".
    11 Jul 2012, 10:28 AM Reply Like
  • Poor Texan
    , contributor
    Comments (3529) | Send Message
     
    Net,

     

    Thanks for a clear explanation.
    11 Jul 2012, 12:07 PM Reply Like
  • jackooo
    , contributor
    Comments (1489) | Send Message
     
    Go Bank of America....
    11 Jul 2012, 12:38 PM Reply Like
  • PeterScriabin
    , contributor
    Comments (189) | Send Message
     
    Netrilix - thanks for the explanation! You would think a bank would charge customers according to the costs they impose on the bank, which would simply be the number of days overdrawn multiplied by an overdraft interest rate (with suitable compounding). That's the way it works with a brokerage account that rolls over into margin. Why not the same for a checking account?

     

    These penalty charges for going .01 over the balance seem more like a parent scolding a child, and it's astonishing (and upsetting) that competition doesn't impose a better discipline on the Banks, even in the heavily regulated environment under which we suffer.
    11 Jul 2012, 01:09 PM Reply Like
  • moneyTalksBSWalks
    , contributor
    Comments (193) | Send Message
     
    Good explanation, thanks. I can see the bank's angle on this but given the times we are in(all banks are evil monsters) that angle cannot possibly hold.
    11 Jul 2012, 01:55 PM Reply Like
  • vernhiker
    , contributor
    Comments (2) | Send Message
     
    Their use of dishonest accounting enabled them to charge customers multiple overdraft charges on a single day...when, perhaps, they were entitled to only a single charge of $35.
    11 Jul 2012, 08:52 AM Reply Like
  • jackooo
    , contributor
    Comments (1489) | Send Message
     
    It is not for BAC to take care of your screw ups.
    Make sure there is enough money in the account...
    H E L L O
    11 Jul 2012, 12:39 PM Reply Like
  • jerry6
    , contributor
    Comments (21) | Send Message
     
    Exactly , lets say you spent 50.00 in the morning then 200.00 in the afternoon , they would process the 200 first so the 50 would bounce as well , whereas if they processed it honestly the 50 would pass through and only the 200 would bounce . They have been doing this for years .
    11 Jul 2012, 01:47 PM Reply Like
  • green_valley
    , contributor
    Comments (43) | Send Message
     
    BofA is run by a lawyer so whad do you all expect?
    Sneaky.
    11 Jul 2012, 09:50 AM Reply Like
  • jackooo
    , contributor
    Comments (1489) | Send Message
     
    Congress is made up of lawyers.
    11 Jul 2012, 12:40 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3529) | Send Message
     
    "Congress is made up of lawyers."

     

    Isn't that the problem?
    11 Jul 2012, 12:54 PM Reply Like
  • jackooo
    , contributor
    Comments (1489) | Send Message
     
    Absolutely.
    11 Jul 2012, 04:24 PM Reply Like
  • JDrake
    , contributor
    Comments (4) | Send Message
     
    As long as the Federal Reserve keeps interest rates as low as they are now, banks are forced to look for any means to turn a profit. Including fees for all their services; high risk investments (soverign country derivatives); and shorting their own "under water" mortgages.
    It's pure (unregulated) capitalism at it's finest. "Let the buyer beware"
    11 Jul 2012, 01:42 PM Reply Like
  • 4MamaMary13
    , contributor
    Comments (9) | Send Message
     
    Technically, the system was structured to process transaction as it comes or on a real time basis so that if the $ 210 comes in at 10am and I only have $200.00 in my account, then it will incur $35.00 overdraft outtright. It will immediately show "declined" trans due to overdrawn amount. If we're talking of checking account, and I have saving account then it's a different story.
    This matter can be resolved by emotional intelligence on both sides.
    11 Jul 2012, 05:26 PM Reply Like
  • 4MamaMary13
    , contributor
    Comments (9) | Send Message
     
    just a silent bystander who believes that the one reason why we still have a world or a society that is still functional is because there's still ENOUGH people who don't lie. Another reason is that we are all equipped with inherent power to do good, all we need to do is turn on the switch so we can see the light to a blissful world.
    11 Jul 2012, 05:40 PM Reply Like
  • herschfields
    , contributor
    Comments (95) | Send Message
     
    Our financial systems are not Welfare programs. Get serious.
    12 Jul 2012, 05:20 PM Reply Like
  • Tnbuchs
    , contributor
    Comments (10) | Send Message
     
    Right on Jackooo!!!

     

    For many years I lived paycheck to paycheck, and several times I over-drew my checking account. I never once blamed the bank for charging me an overdraft fee. I have had accounts at BOA and community banks, and if I overdrew my account, I discussed it with my banker, and MOST times they either credited my over draft fee or helped me with the situation, even BOA.

     

    It doesn't matter what F'n processing rules a bank deploys, if you only have $210 in your account, don't spend $210.01!!!

     

    Jerry6, if I have $210 in my account, and I spend $50 in the "morning"' then I don't get to spend $200 in the afternoon! Even pub education should have taught that much! Though that may be questionable!

     

    Balance your check book more than once a year, it isn't the banks responsibility to baby-sit your spending habits.
    14 Jul 2012, 02:52 AM Reply Like
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