Is Consumer Stupidity Incurable?

September 21, 2011 by  
Filed under Fools of Finance

I saw this headline and had to comment: Banks continue to rake in huge amounts in overdraft fees.

Wait – it gets worse when you read the specifics: Banks and credit unions received $30.8 billion in overdraft fees in just the first 6 months of 2011.

That’s $30.8 BILLION!

How can people complain about government excess when they are wasting so much of their own money writing bad checks?  Will nothing cure them of personal finance stupidity?

I suppose that some of these folks have surrendered their credit cards (or had them taken away) and feel good that they aren’t using them.

Instead, they now write checks (or make ATM withdrawals) against insufficient funds as a way to obtain “credit.”

This is one of the worst forms of  “stupid tax.”  Part of it is fee gouging by the banks, of course. But lack of personal accountability is the primary cause.

The feds will try to intervene but anything short of forcing the banks to close the accounts of serial overdrafters is doomed to failure.

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2 Responses to “Is Consumer Stupidity Incurable?”
  1. Jonathan says:

    I don’t think that data can be accurate. $30 billion in 6 months? That’s $100 in overdraft fees for every man, woman and child in the country in 6 months – $200 per year, $800 per year for an average family of 4. With a couple of basic assumptions, it quickly gets ridiculous – assume 20% of the population is unbanked, which includes children and many illegal aliens. Of the 240m people left in the country, assume that half are fiscally responsible enough to never have overdraft fees – now you’re down to 120m people making up 100% of the overdraft fees. Of those, I’d assume at least half are only very occasional over-drafters. Say once every 6 months, with $50 in associated fees. So now we have 60m people at $50 each in this period paying a total of $3 billion, and another 60 million people paying the remaining $27 billion – $450 each in 6 months. Is that possible? Note that my assumptions that whittle down the population are, to my mind, very conservative.

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