Republic Bank Half-Truths

Recently I've been getting emails and letters from my bank, Republic Bank, about "continuing to have overdraft protection." According to them, they've been glad to provide overdraft protection on my accounts all these years, but due to recent legislation passed by Congress, I will lose that protection unless I specifically sign up for it, or "opt in." They are repeatedly encouraging me to sign and send in the opt-in form.

Wow -- sounds like something I should jump on, right? After all, we all want overdraft protection for those times when we do an "oops" on our account. And that legislation -- what's up with that? Why in the world would Congress want to come between me and my bank?

Well, as Paul Harvey used to say, make the jump to get the REST of the story.

For many years after debit cards came into vogue, banks simply declined to honor them if you didn't have enough money in your checking account. That was just like a credit card -- not enough credit, card gets declined.

Then banks realized that since the card was going against your checking account, getting money out or charging something when you didnt' have the money was just like overdrawing your account with a check. Bing! The dollar signs came on: "We can charge overdraft charges on debit cards, just like checks!" And it was off to the races.

So, you could use your card to buy that ice cream cone for a dollar, and get a $35 overdraft charge to go with it. Get a cuppa joe and make it $70. Throw in a paper and let's go for $105.

Was it your fault for not knowing how much was in your account? Sure it was -- which is why most people just paid the charges and went along, because who wants to admit that you paid $36 for an ice cream cone because you are too stupid to keep track of your money?

But some people began to ask why banks should be able to charge such a high fee for something that is, after all, a completely electronic transation. Unlike paper checks, which require some amount of handling, an overdraft on a check card gets assessed with no effort on the bank's part, once it makes a few changes to its software. In short, this looked like a great scam for the banks.

So, the new legislation says that banks have to go back to declining your card and not charging you a fee, unless you specifically ask them to "cover" your card no matter what. What Republic Bank isn't telling you is that by opting in to the so-called "overdraft protection," you are telling the bank that you WANT those $35 charges. You're not getting overdraft protection, which most people would take to mean "we'll honor your charge this time because we know you're good for it, and we won't charge you" -- nope, you're getting "we're glad to honor your card any time you use it because we get to charge you hundreds of dollars of extra fees and it's a great deal for us."

Do I have a problem with the fees? Not completely -- I think they're ridiculously high, but I get the idea that the bank has to have some sort of deterrent. What I object to is the half-truth that Republic is spreading. If they had explained the whole deal, and said something like "if you want to be covered no matter what, then you'll have to pay" then I wouldn't have a problem. They could even have helped people make an informed choice: if you rarely overdraw your account, and you want your bills to go through no matter what, then opt in. On the other hand, if you're really bad with tracking your spending, then perhaps you should opt out and deal with the embarrassment some, so you'll get better at knowing where your money goes.

The funny thing is, for the most part I LIKE my bank. Republic is relatively local, seems to be involved in the community, and has had a good web site and services for a long time. This, though, was an opportunity to be transparent, and they blew it. Here's hoping that they step back and realize this is not a good time to look like a Wall Street banker.

Comments

[Shanda]

I have been getting the same types of mailings from Chase, so I don't think Republic is alone in this. No, it doesn't make it better that several banks might be doing it; it is still deceiving and wrong.