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Old 10-14-2010, 02:25 PM
Eric Biesel Eric Biesel is offline
Join Date: Jun 2010
Posts: 48
Default Re: We Know How to Do Crazy Now (Tim Fernholz & Katherine Mangu-Ward)

Originally Posted by themightypuck View Post
I don't understand Katherine's argument that if banks can't hide the cost of their product they won't be able to offer it. I suppose she is also concerned about regulations that will limit the opportunity of poor people to get rich through ponzi schemes and multi-level marketing.
I think that she's talking on the level of behavioral economics. There is economic literature that people underestimate the financial risks of overdraft fees, and balk at the prospect of paying an annual fee for a checking account when one could find a bank that offers "free checking". There are of course many banks that do charge for a standard checking account, and I would imagine that many of them can avoid charging draconian overdraft fees since their profits may come more from the annual fee. The consumer, as evidenced by the fact that the majority of Americans with checking accounts pay no annual fee but get reamed by overdraft fees, evidently doesn't understand this dynamic, or does and isn't worried about it.
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