A "simple" checking account?

Checking accounts used to be simple matters. It was one of the first steps taken by a teen to prepare for the financial world. You deposit your paycheck, your allowance, your birthday money, whatever. You write checks at the store when you buy stuff, or go and make a cash withdrawal so you could have money to out on Friday night, since you can't write checks at the football stadium or the movie theatre.

Now checking accounts don't seem so simple to me anymore. I understand the concept of providing new services, and I am definately in favor of utilizing new technology (i.e., debit cards).

I read an article in the USA Today yesterday that made me think about this. It is titled "Banks' 'courtesy' loans at soaring rates irk consumers". This is about those fees charged by your bank when they choose to cover a check that overdraws the account.

Like nearly everything else in life, there are two sides to this story. And I'm not sure what happened to common sense along the way.

First, let's go back to the simple concept checking. Before you write a check, you ask yourself, "do I have the money to cover this check, along with all the others I have already written or know I have to write?" If the answer is "no", then stop, go no further.

But reality comes in and says, "I get paid Friday, today is Wednesday, this check shouldn't clear until after I get paid". So now you go to living on your next paycheck before you actually get it. You are continually behind a week or two, depending on when you get paid.

Then the bank comes along and says, "we understand that you really want the rent check to clear, and the bigger dollar checks are usually for real important stuff, so we'll clear those first so as to not cause you a problem with your landlord, or your car loan, or whatever."

So, they decide to pay your largest dollar items first, then the smaller ones. For those who have run out of money in their account along the way, this means more individual transactions do not clear. But wait, the bank is going to pay those for you anyway, as a courtesy, to not cause you a problem due to having a check returned at whatever store it was.

Has anyone else picked up on the complete lack of logic in this? Remember, the bank pays the checks that wouldn't have cleared. Of course, there's a "small" fee for this service. Call it $20-$29 for each transaction.

But here's the biggest kicker. Wait for it... wait for it....

The bank is using the logic that they are protecting their customer by paying the largest item first.

But if they are paying all the items anyway, what difference does it make to them which check gets paid first, if at the end of the day, ALL the checks get paid?

The difference is that by paying the large item first, they can pay "as a courtesy" more checks after the account balance hits zero, and therefore charge more of those transaction fees, thereby putting their customer (you) further in the hole at the bank, when you already don't have money in the bank.

How, exactly, is that a courtesy to you? Is it supposed to be a privilege to be charged more fees and pay them to the bank?

Seriously.

Again, there are two sides to this. And again, I think common sense has gone away.

The bank says that the customer is responsible to not write checks that can't be covered by their balance at the bank.

The customer says that the bank manipulates the order of clearing checks, and delays deposits so they aren't credited as the customer expected (there's a whole different story here).

Common sense (both sides, pay attention, please): The customer should pay attention to the balance at the bank, and not write a check that can't be covered at the time it is written. I understand the concept of holds placed on debit card transactions, and that created a difficult wrinkle to maneuver around. So keep a cushion in the account. If the bank wants to pay all the checks as a courtesy, when paying them all results in an overdraft, it should be done in a manner than minimizes the fee to their customer. This is what we call customer service.

I understand that a bank is a for-profit enterprise, and needs revenue streams. But putting customers as far into the negative as possible hurts everyone in the long run, I believe.

Maybe this is just one more reason I use a local bank instead of a national bank.

More research

I think it's pretty interesting how each day another new thought or concept pops into my head. Sometimes the idea is completely new to me, sometimes the concept is the convergence of random thoughts into something that resembles coherency. One day at a time, one step at a time. It's a good thing I started writing these things down.

My thoughts for today:

What are the graduation requirements (if any) in each of the fifty states in the area of financial literacy, economics, or anything resembling the like? I have looked at Texas and Oklahoma so far. I must say, the Oklahoma State Department of Education appears to be taking this quite seriously. They have created a "passport", containing several key concepts, that will be required for graduation no later than the graduating class of 2014. Concepts include checkbook balancing, identity theft, understanding loans and predatory lending, and several other real world topics.

My other primary thought today involves my need for a partner. Or partners. Someone with complimentary skills. That could be in the areas of financial planning, education, ministry, media, or who knows what else. I know I'm not smart enough to do all of this alone. What does the partnership look like? Again, I have no idea right now. When the time is right, it will happen.

One day, one step at a time.

Financial Literacy needs

So. I have been drawn towards compiling and / or creating educational media in the area of financial literacy for those between the ages of, say, 16-25. This appears to me to be a topic that has not had just a whole lot of attention. Quick google and amazon.com searches do not provide an over abundance of information targeted to this demographic.

So what then am I going to do about it? I'm not exactly sure. I am gathering information to determine what already exists. Some of that may be out of date by now. Some of it could be outstanding material. This blog is an outgrowth of my need to pursue this avenue until it runs its course. How long will that be? I have no clue.

The bottom line is that we do not need a generation that is financially illiterate. Students today possess powerful tools that provide instant results - direct uploads of videos to YouTube, posting pictures on Facebook or MySpace, iPhones and Blackberry devices to maintain constant contact with whatever they desire. Further, I believe that today's students are quite intelligent, and are very adept at multi-tasking. Therefore, a strong foundation of financial literacy is required for their future economic stability. By extension, the combination of those powerful tools and even a basic grasp of most financial concepts will make them intelligent creators and consumers of goods and services during their adult lives.

I encourage comments, stories, school programs and curriculum that work and those that do not, success and failure stories, essentially anything related to this topic.