Tired of overdraft fees? Try postal banking
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Devin Thomas O’Shea is a writer living in St. Louis. This column was produced by Progressive Perspectives, which is run by The Progressive magazine and distributed by Tribune News Service.
Many of us have been hit with overdraft fees on our checking account before, and while it was nice to have the protection, the $33 fee – the average overdraft fee these days – definitely stung. .
What if I told you that overdraft fees are an intentional failure move by a wealthy few in an increasingly rigged game against the rest of us?
Banks have collected over $460 billion in overdraft fees since 2010. In the last three months of 2020 alone, JPMorgan Chase, Wells Fargo and Bank of America collectively collected over $300 million in overdraft fees. One bank CEO – Bill Cooper of Minnesota-based TCF National Bank, who was sued by the federal government for “cheating consumers into expensive overdraft services” – even named his yacht “Overdraft”.
It’s no exaggeration to call overdraft fees predatory. The Consumer Finance Protection Bureau found that less than 9% of consumer accounts pay 10 or more overdrafts per year. This means that a small percentage of accounts – likely low-income consumers – account for almost 80% of all overdraft income.
What if I also told you that it doesn’t have to be that way, that in over 100 other countries people don’t have to worry about overdraft fees? This is because these countries have publicly funded postal banking services. People in countries as diverse as South Africa and Kazakhstan can open an account, cash a check, get money or deposit in low-cost ATMs, transfer money, pay bills and more so without a predatory bank siphoning off profits from their executives’ yachts. .
That’s why the US Postal Service needs to expand its small postal banking pilot program, launched last year, even though it hasn’t been as popular as expected. The agency only offered banking services at four locations and did little to market the program.
To be effective, the program must be significantly expanded to meet demand. The number of “unbanked” Americans is staggering. One in four US census tracts, home to 21 million people, does not have a bank within its borders. More than 7 million people do not have a bank account.
It harms everyone. Without a bank account, it can be difficult to participate in the economy. With the more commonly used direct deposit payroll, it can be difficult to find a job, buy a car or pay rent. Instead, low-income people rely on predatory payday loans. Payday loans come with an absurd interest rate – often starting at 300 percentage points, which can double over time.
Like overdraft fees, payday loans are meant to be a “short-term” solution. But they don’t actually shake that way. Some 76% of total industry volume comes from borrowers who reborrow before their next paycheck.
The banks and the elected officials who carry their water qualify the postal bank as “radical”. Still, the Postal Service offered banking services from 1911 to 1967, and restoring the service could generate $9 billion in much-needed revenue for the agency each year. One of the reasons the Postal Bank was phased out was that it offered relatively high interest rates, which competed with “more traditional banking institutions”.
Worldwide, 1.5 billion people receive financial services at their local post office. There is no reason for the United States not to follow. A recent poll shows a strong majority of Democrats — and even Republicans — support postal banking. The only thing standing in our way is the billions of lobbying dollars Wall Street spends every election cycle to protect its predatory profits.