Customers or Fees: Contradicting Strategies (and the fees are going to lose)

On one hand, the banks and credit unions aggressively want to attract more customers. On the other, the banks and credit unions are addicted to fees, NSFs in particular. Rather than incur an overdraft charge, consumers overwhelmingly prefer their debit card purchases to be declined at the checkout per a 2008 survey by Opinion Research Corporation.

It once was that overdraft protection was provided just for check transactions. For a fee, the bank would honor a check even if there weren't enough funds in the account to cover it. Overdraft is now extended to ATM withdrawals and debit card purchases. ATM and debit cards have been marketed as the good plastic: Unlike credit cards, these were supposed to be the same as cash. Most customers think they can't swipe and spend more than what is in their bank account, but they are wrong.

An overdraft study published late last year by the FDIC found that at least 81 percent of banks allowed overdrafts to take place at ATMs and debit transactions. An overwhelming majority of banks in the FDIC survey did not inform customers that they lacked enough money in their accounts to cover their electronic transactions. Only about 8 percent of the financial institutions informed consumers that funds were insufficient before transactions were completed, thus giving them a chance to avoid both the overdraft and the fee. Fees assessed by banks ranged from $10 to $38. The banks collected over $20 billion in these fees in 2008.

When you make so much money on something so unpopular, things happen. In this case, Walmart and the Fed.

First Walmart. Banks and credit unions fought ferociously to keep Walmart from getting a bank charter (rather than compete). They thought they had won. Now Walmart has a partnership with GE Bank where they offer a prepaid Visa debit card. Free to reload and they accept direct deposits. If the money is not on the card, the consumer is denied the purchase and there is no fee. Exactly what most consumers want. Who do you think will win their business in the long run?
Second the Federal Reserve is considering two alternatives:

• Institutions would be prohibited from automatically enrolling customers for overdraft protection services. Instead they would have to first give customers notice and a reasonable opportunity to opt out of the service.

• Institutions would be required to get a customer's permission to provide overdraft protection. Customers would have to choose to opt-in before any fees could be assessed.

The rule change would only apply to overdrafts for ATM withdrawals and debit card purchases. It would not affect overdraft protection for checks or recurring debit charges.

NSF fees for banks will be going down over the next few years, either by competition from the Walmarts of the world or though regulation or a combination of the two.

Technology ... gone too far now

Twitter has introduced a new application ... BillMyParents. Like they need more help?? The app even has a special "one-click" feature. It just can't be too convenient. I for one wouldn't want to be the cog that is wasting my kids/grandkids valuable time at spending my money. Heaven forbid they would need to talk to me. ... and finally, adding insult to injury, they charge the parent $.50 per transaction for the privilege. Ouch.

Poor Hayden

I had lunch with Jill and Hayden today ... and Shirley joined us. Hayden's birthday party and presents were the primary topic of the day. After all, it's only a month away. What she likes, what to get her, what other people are getting her, where to have the party. She was right there. I remember when these things were suppose to be a surprise. Hayden took it all in ... between moving everything from the table to the floor and entertaining all the tables around us. I can't help but think she is going to be disappointed. Parents are taking all of the fun out of growing up. Go for a car ride ... get strapped down so you can hardly move plus you face away from everyone. Child proof doors so you can't do any exploring. All the fun toys (leaded Chinese and those that shoot edible projectiles) have been banned, except for some special ones like an empty box or a dish rag. I don't know why she is always smiling.

StuffWhitePeopleLike

My friend Lea suggested the above named blog to me. On one hand she thought it was my kind of humor but on the other hoped I wouldn't take offense. She is really perceptive by being right on both accounts. It is really funny (if you have my sick sense of humor) and is dangerously close to describing me. He blogs about white people having one moleskin notebook and has an exact picture of one I carry in my briefcase. He suggests it is a place for us white people to keep our creative ideas but that in reality we have none. For me, it is just for show when I'm out of town. (I use the $1 ones in town.)

His previous blog was on tattoos and reflected a mirror image of my thoughts. Tattoos conjure up images, “all of … things that white people do not like, except for sailors.” … “A white person getting a tattoo is a major step in their life as it presupposes that their taste at this given moment is good enough to sustain them for the rest of their lives” which means it has to be funny, ironic or self-deprecating. “A white person with the right kind of tattoo is generally very popular within the white community … If you find yourself competing socially with one of these people, there are a few things you can do in order to defeat them. Your saving grace is the fact that white people not only enjoy getting funny/ironic tattoos, but they really enjoy talking about them too! Therefore, it is essential that you already have 2-3 clever tattoo ideas ready to drop into a conversation.” Now that’s a good tip we can all use.

Thanks Lea. I love it.

Law of unintended consequences

This law usually means the entity that did things right gets screwed. For example, the bankruptcy laws. Delta and United airlines go bankrupt. They get to renegotiate their debt (about $.50 on the dollar) and other obligations like labor union contracts. The airline that drove their competition into bankruptcy (American) now has uncompetitive financing and labor union contracts.

The current financial crisis will likely yield a similar consequences. The big guys, saved by the taxpayer, will do fine. They will have a lot less competition because their horrible decisions will result in new regulations that will hurt the small banks and credit unions much more then them. The costs of complying for the big guys are spread over an asset base of a trillion dollars. The little guys have to spread it over a base of a few hundred million. Big difference. Similarly, the little guys did not make the liar loans that became the addiction of the big guys, but they did invest in the fictitiously rated triple A bonds the big guys peddled. They lose most of their investment and don't get any help. Is this capitalism??

Babies ... When did they become fun?

My dad once told me that he preferred kids once they were around the age of two ... talking, laughing and running. Before that they cry a lot, spit up a lot plus other body emanations and when they are not doing one of these, sleeping. ... and if you are not quiet, the cycle starts again. Experience through most of my life confirmed his findings. Questions of the theory started to arise about the time Landry was born. More contrary information with Audrey, but it was more difficult to get quality data because she was in her mother's arms at all times. Then came Hayden and the theory was totally disproved. She rarely sleeps, never spits up (unless you count her blowing out her vibrating lips with food in her mouth) and she smiles and laughs all the time. Few things can make you instantly feel better than when she points at you and smiles wide. Wow. I guess I really like babies. Don't let my children know.

Use condoms .. go to hell - the Pope

Get ready for one of my political rants .... ready, here goes.

The Pope is visiting Africa this week. A continent with the highest birthrate and the infant mortality to go along with it. A continent where the aides epidemic finds the most vulnerable. A continent that can't feed itself and a world headed in that direction. I like to blame religions for a lot unnecessary wars and advice to presidents ... but there is so much more. The Pope goes to Africa where he could do a great deal of good. Instead he tells them not to use condoms ... a simple and cheap devise that could save many from the horrible life/death sentence of aides and many children from starving to death. I suspect he still believes the earlier teaching that the universe rotates around the earth, the earth being the center of all things. I guess they were wrong about that one too.

Get out of my damn chair!

You may recall that I blogged the saga about getting two new chairs for the game table. Shirley, in her design excellence, placed the new, more comfortable chairs in my and Jill's positions. Eric was gone this weekend so Shirley subbed, but rather than partner with Tylir, she was my partner. I swapped positions with Tylir, wanting to be the good host. I didn't realize that Tylir, having spent so much time in that chair, had totally jinxed it. I had never seen such bad cards. Tylir had never seen such good cards, so good even he couldn't screw them up. (Too bad Eric wasn't there to witness it.)

Sunday morning, time for some three handed dirty clubs, Tylir rushes upstairs and takes my chair. ... and the cards he gets are still unbelievable. Fortunately, Eric will be back the next time we play. He is big enough to get Tylir out of my chair, I'm just not sure what it will cost me ... or if Tylir has spent enough time in it to totally jinx it as well. Sometimes you don't realize how good life is until it changes.

Hail Mary ... and I thought it was a long pass

We all know that times are tough ... but not necessarily for all. Businesses that are having great years include McDonald's, liquor and guns, with gun sales setting new highs. McDonald's is hard to figure. Losing money in the stock market just doesn't say "go eat a Big Mac" to me. I might be more interested if shares of citi are added to the dollar menu as suggested on SNL.

Now liquor I understand. I'm under all this stress and Mary is coming to visit Shirley. It is incredible how a visitor can impact the to-do list, my to-do list. I was hoping that Shirley would learn from her recent visit to see Michael. Mike's to-do list wasn't actionable before she arrived but rather once she got there ... and of course it was her to-do list. Mike's way of letting her feel she's needed. Unfortunately, the lessen was lost on her.

My ever expanding to-do list includes spring planting (and rock moving), weeks before you really need to. ... and who knows, maybe spring won't come his year. She even had me repair the towel holder that Jill and Tylir ripped out of the wall. And blow out the garage when we have a barn to tear down. Yep, I could use a drink. ... and maybe one of those guns.

Time to confess

All right, who ever you are ... stop pretending you're me and writing all those things about Jill. They are all untrue and I'm really mad you said those things about her. She's would never intentionally mislead Tylir ... or lose an email from me for that matter. She isn't perfect, so there. You better stop or I'll find you.

Tylir asks Jill ... or does he??

Tylir sent me an email yesterday requesting a web site I had sent to Jill a couple weeks before. You might wonder why he would need to bother me for this information. I think there are several possibilities.

• The burden to ask Jill is simply too great. First the 3rd degree. Who wants to know? Why does he need that information? The “I don’t think he needs it” discussion. Finally the inevitable barter, I’ll give it to you after you have painted the game room.
• Perhaps he asked Jill, went through the 3rd degree only to have her snippily respond that she doesn’t have that information anymore

… which lends itself to all the possibilities as to why she wouldn’t have the information:

• My emails still go directly to junk mail because she continues to be upset that she was number 4 on my speed dial 3 phones ago.
• She actually has it but there is a new episode of the bachelor about to begin on the TV.
• She has it but enjoys watching Tylir suffer.

Or could it be that little-miss-perfect (sweetheart, I say this with the utmost affection … and I got it from Tylir) actually lost the information? As unlikely as this possibility seems, I’m sure there is a good explanation for it.

Top Pain Scientist Fabricated Data in Studies

In my continuing rant on how pharmaceutical companies intentionally kill more people than terrorists comes further evidence in today's Wall Street Journal. The headline is the title of this blog. It starts "A prominent Massachusetts anesthesiologist allegedly fabricated 21 medical studies that claimed to show benefits from painkillers like Vioxx and Celebrex, according to the hospital where he worked." Of course he was funded by the pharmas he promoted. In reality, Vioxx and Celebrex work less well than IB Profin, which doesn't cause the heart attacks like the other two ... oh and it is 100 times cheaper ... gee I wonder why the big ad dollars are spent by the pharmas to get us to take a dangerous drug that doesn't work as well as an old, cheap drug. Go figure.

Sea levels rising faster than expected - scientists

Just a reminder that the global environmental issues keep getting worse ... even faster than the already bad projections. I really fear that my grandchildren will see the earth in a death spiral ... at least as far as humans are concerned. There is no hope for governments solving the problem. How long have we known there was a problem with social security?? 25 years? ... and the fix here is easy. Just make the annual increases tied to inflation instead of wage increases. There is no chance they will seriously address the climate issues until it is too late. We probably should keep spending on defense (more likely offense) for when it gets bad. Good relationships today (NATO) will disappear quickly when their existence is threatened.

Who says you can never go back

... Not true of the dump, having made the third trip in less than two months. We unknowingingly went on Collin County's Big Garbage Day ... just lucky I guess. Dozens and dozens of vehicles loaded with past treasures, not to mention long lines. We really appreciated it being probably the only paying customers for the day. The special events included another massive display of sea gulls, local convicts helping people unload and picking up litter ... and did I mention the lines? The aroma of fresh garbage makes this part particularily attractive. Strange as this may seem, Jeffery opted out last time and this time; and even Landry opted out this time. They just don't know what they are missing ... or do they?

Jill's New House

Jill and Tylir have been thinking about moving for the past several months. The primary motivation was someplace closer to Tylir's work. That way he could come home for lunch and spend more time with Hayden. Isn't that sweet. Then there is reality ... the deal trumps all. They have considered two different homes, both several miles further out from Tylir's work, friends, family, etc. The latest one was a foreclosure in northwest Plano. The deal was good, even great (or too good). So much so that they put in an offer for over the asking price. There bid came in around 30th with the winning bid over $100,000 more than asking. Oops.

Jill, thinking she had a new home, spent the sleepless hours redecorating the place last night. She had my room on the second floor ... at my age can you imagine. The only bedroom on the first floor was the master. Sounded appropriate. So what was the problem I asked to a silent phone on the other end. I think they need to do a lot more thinking before they make any more offers.

Home Coming

Michael's laundry is done and his apartment cleaned (at least as much as you can with the yet unpacked boxes in the middle of the floor) so it's time for Shirley to come home. The only disappointment being that the two of them did not get to sit down and watch Judge Judy together.

My last night alone was anything but. Eric invited me to dinner with the family. Landry managed to hit me up for contributions to his favorite charity (or should I say the school's favorite) and he is lobbying hard for a red barn. Jeffrey announced that he really likes the freedom of having a driver's license even if he has to run a few errands for Dena. I guess he is normal after all. Good food and a good game of catch in the living room made for a nice final night on my own.

Book publishers following music publishers into the abyss

Amazon just announced their new Kindle, an eBook reader. One of the new features was that it would read the book to you in that echoey computer speak. Publishers claimed foul, that Amazon is creating a derivative work. Legally I suspect they are right, but doesn't this feature help sell more books? Book publishers get paid for every Kindle book, unlike the music publishers that get zip for file sharing music. Has any company won when they tried to stop the advancement of better technology? How about the ones that tried to stop the VCR? TIVO? music? movies? anything? The answer is NO.

The good news is that the barn is empty thanks to the help of Jeffrey, Landry, Dena and Eric ... it's ready to be demolished and rebuilt. Our personal stimulus package for the dismal economy.