Does overdrawing my checking account mean that I'm a lazy, inept financial manager or an otherwise responsible account holder who just dropped the ball?
It depends on whom you ask.A recent column about the sting of $170 in fees arising from my overdrawn checking account -- and my call for legislation that would require banks to notify their customers of overdrafts electronically, instead of via snail mail -- certainly caught readers' attention.
In the column, I said I was perturbed by the practice of assessing overdraft fees against nominal debit purchases, such as an $11 Dunkin' Donuts transaction, which, it seems, could be easily blocked when an account is overdrawn.
An outpouring of email responses to the column was divided between harsh critics and sympathetic readers who confessed to making the same error. Colleagues also emailed me privately to commiserate about being slapped with multiple fees after overdrawing their accounts.
Here's a sampling of reader comments:
"This has happened to me ... but I was so embarrassed because I know better. It seems that no one ever admits to financial screw-ups. But still, it happened, and I was blown away with how much a tiny purchase could end up costing me."
"Then use cash. No one is putting a gun to your head to be convenient."
"I recently had a similar problem when a check someone gave me bounced. By the time I got a snail mail letter, the checking account was overdrawn for $6 and had $105 in recurring fees. As my other accounts are substantial, I wrote a note to the bank's chairman [saying I was transferring all my accounts] and was going to make it a point to tell 100 people over the next month what poor customer service the bank practiced."
"Why should the bank let you float an unsecured loan at no charge? Last time I checked, banks were not operating as nonprofit organizations. I find it hard to believe that any person could ever overdraw an account who properly manages finances."
"I can't believe a business journalist like yourself is so lazy that [she] can't make ... easy precautions. Shame on you! You need to apologize for an embarrassing article."
Thanks for the feedback -- and for considering the issues.
Do I wish that I hadn't overdrawn my checking account? Of course. However, was the column embarrassing, and must I apologize for writing about my financial blunder?
I still feel strongly that banks have a financial incentive to allow a longstanding customer's overdrawn account to persist indefinitely -- because each automated transaction and debit that posts to an account during that time generates an insufficient-funds fee. Why should a bank float me an unsecured loan at no charge -- as one reader asked?
The answer is because I am constantly floating loans to banks -- in the form of checks that I deposit, but which don't always clear right away, or via savings and money market accounts for which I receive paltry returns.
Most significant, I made a rare error in financial management. Nearly everyone falls victim to a financial train wreck on occasion -- and there's a good chance that you will, too. Balancing your checkbook every month doesn't mean you're off the hook. Financial errors play out in ways that none of us anticipate.
Think you're immune? Don't. Just ask my colleagues -- many of who recounted at least one financial blooper. They include:
- Withdrawing $300 from an ATM and driving off without the cash.
- Not catching an incorrect account number printed on a new order of checks -- until the checks for that month's bills all bounced.
- Owning Enron stock.
- Placing a wallet on a car roof while loading young children into car seats -- then driving away, as the wallet flew off into a busy road.
- Buying stock in the supposed "next big thing." The value ultimately doubled. But the owners didn't sell quickly enough. It tanked and they lost everything -- including most of their initial investment.
- Accepting a job out of desperation that paid a straight commission with a draw against pay. Charging everything to get by -- and getting fired.
I'd never guess these errors would have happened to any of the people who revealed them to me -- all successful, well-educated professionals. They're not bad financial managers -- just humans trying balance financial responsibility against the moment's screaming child or three consecutive 12-hour days at the office.
I'm that person too -- and a bank customer with many years of savings potential in my future. Financial institutions don't think twice about using my cash.