Bank of America has announced that it will end overdraft fees on debit transactions. But although it seems to be a move that will benefit the little guys, it puts BofA in a position to make money money.
How will losing all those overdraft fees that the bank would collect help the bank? Simple, you cant spend the money if you don’t have the money. The banks are now going back to vanilla type of banking. Banks make money when you have money, but what if you don’t have money, the bank will make money on you by giving you money in return for you giving them back more money.
Banks dont want to give bad loans out because they are still reeling from screwing up with the sub prime mortgage collapse. But banks need money to make money, so how can they get you to give them money you dont have? By giving you money to use when you dont have money!
Think of your debit card now functioning as a credit card that you don’t have a choice of if you will pay the balance or not. Banks are great speculators and whats an easier speculation than the fact itself? Given the fact that the bank loan out a certain amount of money that they know they will collect when your direct deposit goes through, they can use those impeding “paychecks” to put to work.
The question at stake is if the others banks will follow suit or wait to see if BofA has a goldmine or a caving coal plant. BofA is being proactive and is taking aggressive action in the laggard financial sector.
