It Costs Too Much To Be Poor

I have two teenaged daughters, the elder of the two has just crossed some $400 plus in bank fees cumulative. She has only a debit card, but it seems she is destined to make one of each possible mistake that generates a fee. The first one was the most obvious, a simple overdraft. The most recent was trickier, a Friday post 4pm deposit still had not shown up Monday at 5pm. Ding!

We make her pay these things but in the big scheme of things this house earns enough money for which these are mere annoyances. It is not so for most other people.

For a young struggling family a $35 ding can be a week's groceries. (Yes, it can!) The fees went up during the boom. When the busy-body do-gooder regulators "review" these fees they find the fees reasonable. Of course they are. What with the cost of employees, the physical plant of marble and granite offices, the management overhead, regulatory compliance, a $35 fee for a computer-noted $2 overdraft is reasonable.

There is no real good technological solution to this problem. There is cash, and there is self-control, either of which would solve the problem of overdraft fees.

But there is the other aspect, where people unfamiliar with the banking system, find it overwhelmingly unfair, relatively speaking and thus are alienated by banking.

To become banker, you have to get a charter and follow certain rules. The big boys can do it, cheat steal lie and still make money, if nothing else through bailouts. Small guys cannot. There are those who know how to make money a the small bank level, and could make money on $2 overdraft fees, if the costs of compliance were not so huge.

In a free market fees would always be going down not up. Banks' overhead would be lower so costs would not be so high. Alienation from the system would not be so widespread. Just because banks spend so much does not mean that it costs that much.

We need a free market in banking too.

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