• Sat. Oct 1st, 2022

Tired of Overdraft Fees? Try Postbanking

ByCindy J. Daddario

Sep 18, 2022

Many of us have been hit by an overdraft fee on our checking account at some point, 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 a deliberate move by the rich?

Banks have collected more than $460 billion in overdraft fees since 2010. In the last three months of 2020 alone, JPMorgan Chase, Wells Fargo, and Bank of America collectively raked in more than $300 million in overdraft fees. One bank chief — Bill Cooper of Minnesota-based TCF National Bank, which the federal government is suing for “enticing consumers into costly overdraft services” — even called his yacht “overdraft.”

It is no exaggeration to call overdraft fees predatory. The Consumer Finance Protection Bureau (CFPB) found that fewer than 9% of consumer accounts pay 10 or more overdrafts a year. That means a small percentage of accounts — likely lower-income consumers — account for nearly 80% of all overdraft revenue.

What if I also told you that it doesn’t have to be that way – that people in more than 100 other countries don’t have to worry about overdraft fees? This is because these countries have publicly funded postal banking systems. People in countries as diverse as South Africa and Kazakhstan can open an account, cash a check, withdraw money or deposit at cheap ATMs, transfer money, pay bills and more without a predatory bank skimming profits for their executives’ yachts.

That’s why the US Postal Service needs to expand its small postal banking pilot program it launched last year — even if it wasn’t as popular as expected. The agency only offered banking services in four locations and did little to market the program.

To be effective, the program must scale dramatically to meet demand. The number of Americans who are “unbanked” is overwhelming. One in four U.S. census districts, home to 21 million people, does not have a bank within its borders.

It hurts everyone. Without a bank account, it can be difficult to participate in economic life. With the more commonly used direct payroll, finding a job, buying a car, or paying rent can be difficult. Instead, low-income people rely on predatory payday loans.

Payday loans have an absurd interest rate.

Payday loans, like overdraft fees, are meant to be a “short-term” solution. But they don’t shake that much in reality. About 76% of the total volume in the industry comes from borrowers re-borrowing ahead of their next paycheck.

The banks and the elected officials who carry their water call postal banking “radical.” Still, the Postal Service offered banking services from 1911 to 1967, and the reintroduction of the service was able to bring the agency a much-needed $9 billion in revenue each year.

Globally, 1.5 billion people receive financial services from their local post office.

There’s no reason the United States can’t follow suit. Recent polls show that a strong majority of Democrats — and even Republicans — support postal banking. The only thing standing in our way is the billions of dollars in lobbying that Wall Street spends each election cycle to protect its predatory profiteering.