Startups are needed to ease millennial overdrafts
Millennials are earning a lot less money than their parent’s generation and coupled with a much higher cost of living in major cities in the U.S., young people are having to make an art form out of managing expenditures.
Yet, despite their best efforts one in ten still state that they are forced into overdraft at least ten times per year.
Despite the passing of a federal law in 2010 which was supposed to prevent consumers being blindsided with exorbitant bank overdraft fees, a new report shows abusive overdraft practices in the banking industry cost consumers nearly $14 billion in fees in 2015 alone.
To rub salt in the wound, a recent Pew Research study found that nearly 70% of card users would prefer to have transactions declined than to have them covered and incur a charge, and that young people and minorities pay the most in those sorts of fees.
In response to the Pew Research study the Consumer Financial Protection Bureau stated it would reevaluate existing rules on overdraft protection programs, and a number of banks including Regions and Santander have since been fined for misleading and overcharging clients.
However, considering the three biggest American banks JPMorgan Chase, Bank of America and Wells Fargo still charge overdraft fees, what new technology is coming that can help us avoid falling into the red, and paying through the nose for it?
There are startups that are looking to expand to the U.S. that aim to reduce debt. Companies have developed wearable technology that gives users a mild “shock” when straying into bad habits; artificial intelligent bots that help consumers save money; and apps that allow consumers to juggle funds between accounts if the consumer is at risk of being overdrawn.
Despite federal legislation and financial watchdogs, America’s three biggest banks alone still made more than $6 billion dollars in overdraft fees last year, accounting for $25 for every adult in the country. It appears that we can’t trust banks themselves to help us keep our accounts out of arrears, so it is time to turn to tech from innovative companies around the globe, to keep us covered from painful and costly surprises.
First appeared at PS