About two weeks ago I was reading on my Kindle for PC (yes…I am too cheap to buy the real device) and came across the following quote from Sun Tzu, “Avoid Strength, Attack Weakness.” As I thought about the quote I realized that right now many financial institutions are quietly putting it to practice.
Recently a large financial institution announced that they do not believe in opt-in overdraft protection because they want to protect their customers from buying a cart full of groceries that they didn’t have the money to pay for. I had to smile at the PR spin on this.
What the issuer did not mention is that they have no problem with you putting that charge on your credit card and charging you 25% interest or higher for the purchase.
Let’s talk about how much swiping your credit card will actually cost in the long run. And again, we’re talking tight spot scenarios… you shouldn’t become dependent on overdraft or credit cards.
Suppose you budget to pay the minimum payment of interest + 1% of the balance and you make the minimum payment of $15. You will pay for those groceries for the next 27 months and pay an additional $92 in interest.
Now, I wonder why a major credit card issuer would shout from the rooftops that they don’t have an opt-in overdraft for a checking account, but doesn’t shout about you paying 25 % in interest over 27 months allowing them to collect $92.
My thoughts are that they are jumping on the overdraft bandwagon. Too bad they couldn’t jump on the 9.90% credit card rate bandwagon.
