Hey, Frequent Overdrafters! The Banks Want You!

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You’re not supposed to spend money you don’t have. But this is what you’re doing when you buy something with a debit card and don’t have enough in your bank account to cover the tab—in other words, an overdraft. Since banks make money when their customers spend money they don’t have, the banks basically encourage customers to do something no one is supposed to do: to be irresponsible and keep buying stuff without regard to account balance.

In light of new rules taking effect August 15, in which customers will only be charged for overdrafts if they sign up for the program, banks have been campaigning to get customers to agree to the $35 fee that accompanies each overdraft, and that amounts to a micro loan. As the deadline grows nearer, marketing teams are helping the banks strategize to maximize the number of customers opting into overdraft protection—and thereby maximize the amount of money banks make from overdraft charges.

And what kind of customer is being targeted by banks and marketers in particular? The most lucrative customer, of course, which in this case means somebody who has a history of paying overdraft fees early and often.

The WSJ reports that three-quarters of overdraft fees are paid by less than 20% of bank customers—so naturally, the banks want to keep milking these frequent overdrafters for as long and for as much as they possibly can.

Marketing companies aiming to assist banks in the drive to get these customers to continue on as cash cows have come up with a profile of a typical overdrafter, described in the WSJ as:

a person who doesn’t pay attention to account balances, lives paycheck to paycheck, and will engage in a transaction despite knowing it will generate a fee.

The person described here is probably lazy and/or too busy to be bothered, and while these characteristics normally mean bad things for one’s finances, they may actually help such individuals after the overdraft changes take effect.

How? Overdrafters paid up because they followed the path of least resistance. It is easier to not do something than to do something. Well before the overdraft rule changes were discussed, anyone could ask his or her bank to drop overdraft protection. Few people did so—because, like I said, it is easier to not to. It is easier to simply go with the flow and accept the $35-per-overdraft service, which banks added automatically to accounts.

It is easier to not pay attention to an account balance than to pay attention to it; it is easier (and sometimes unavoidable) to live paycheck to paycheck than to prudently plan ahead and save; and it is easier to not think much about the absurd consequences of buying a $3 coffee that’ll cost $38 after an overdraft fee. Now, to the consumer’s benefit, it is also easier to not sign up for overdraft protection. It is easier to ignore the pleas of banks and marketers than it is to pay attention and take the step of agreeing that you want the old overdraft system in place, $35 fees and all.

As marketers are eagerly pointing out, the absence of overdraft protection may cause some embarrassment and inconvenience. The pitch to get customers to opt in mention scenarios such as a mother getting her debit card denied at the grocery store because of a low account balance, while her kids and customers stare at her. Afterward, she’ll have to leave the store emptyhanded, without food to bring home for her family.

On the plus side, the shopping trip won’t cost her $35 more than it would have had she opted into overdraft protection. And next time she went shopping, chances are she would know how much money is in her account, or she would head to the store with enough cash to cover her grocery bill. So, in a way, doing nothing—i.e., not signing up for overdraft protection—will make consumers more responsible.

At long last, laziness and inaction triumphs.