68th Ask Josh – Overdraft Fees

In Uncategorized on November 27, 2008 at 6:14 pm

Why do banks charge silly overdraft fees? They make life miserable and sometimes banks charge you when you did nothing wrong! Please help me figure this one out. 


Confused Banker 




Dear Confused Banker,


If you spend money that does not belong to you, you should fully expect to be penalized for it.  If you rather, you could have the banks not back you up when you want to spend more money than what belongs to you. While you may find overdraft fees inconvenient, I think you would be far more inconvenienced if you found yourself unable to fill up an empty car the day before payday, or to have a waiter come up to you in a restaurant to tell you that you are unable to pay for your meal, or if you had to leave a basket of groceries at the checkout counter to return home empty-handed. If you think overdraft fees make life miserable, think of how much better your life would be if you only could buy what you had cash for.

Here is what Dallin H. Oaks has said about those who overdraw their accounts, “It is dishonest to write a check with insufficient funds in the bank to cover the check. The check, being a false representation of fact, is a lie. It is also a crime and deserves to be treated that way.” [BYU Speeches of the Year. “Be Honest in All Behavior” 10 January 1973.]

Rather than prosecuting you, or refusing to continue to protect your hard-earned money, or instead of sending thugs to break your knees asking, “Where’s my money?” they charge you a fee and continue to cooperate with you in financing your life.

If you think that overdraft fees are silly, imagine how silly the idea of no overdraft fees must sound.

To not penalize you would force someone else to pay for your carelessness. Like a parent who does not punish an aggressive child, the rest of the children have to pay for it. Like a justice system that lets criminals go free forcing society to accommodate lawlessness. Like a government letting any old irresponsible businessman manage his company into financial ruin and then give him billions of dollars so he can continue doing the terrible job he has already been doing and continue to take an irrequisite amount of the market share and thereby keep more efficient businesses from emerging. Absurd, isn’t it? That kind of behavior means that everybody has to pay so that irresponsible manager can continue spending more than the business earns.

 We can’t reasonably expect the banks to abolish their overdraft fees. But we can find ways to minimize our costs. According to the United States Federal Reserve, the solution for you to not have overdraft fees is to manage your account properly. However, if you insist that you should not be penalized for spending money that does not belong to you, the Fed offers this advice, “If you have a complaint, first try to resolve the problem directly with your bank, savings and loan, or credit union. If you are unable to resolve the problem, you may want to file a complaint with one of the state or federal agencies responsible for enforcing consumer banking laws.”


So, Confused B, sorry if I have no sympathy to offer you.  I have been nailed by overdraft fees; sometimes unjustly. But banks don’t make life miserable. Banks protect your money. They keep you from having to spend hundreds of dollars to install your own safe in your house to protect the cash you would be forced to hold onto.  They keep you from having to borrow money from loan sharks if you want to buy a home, start a business, or pay for emergency medical care. They offer interest as an incentive for people to save money. They penalize those who spend more than they earn through debt financing. Banks don’t make life miserable, people make themselves miserable and blame someone else for it for peace of mind.

Of course it is inconvenient to pay overdraft fees. But I would rather that overdrafters had to pay a fee every time they overspent rather than all of us having to pay some kind of an annual fee to a communal “overdraft protection fund”, or having banks require background checks to make sure that we will never overdraft and refusing to do business with us if there is any indication that we may overdraft, or just refusing to allow us to overdraft in emergencies and thus leave us in a bind when we may be strapped for cash. 

If you take away individual responsibility, then everybody pays. “And also, if there was no law given against sin, men would not be afraid to sin” [Alma 42:20].


Happy Thanksgiving. Get back to work.


  1. Wow, yeah, good response

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