Banks love rich people who overdraw their accounts
Now that financial reform has reduced the amount banks can plunder in overdraft fees, some banks are using technology to court those lucrative big spenders who don't mind paying ridiculous fines to have their overdrafts approved.
Banks know that 1% to 1.5% of their customers overdraw their accounts on a regular basis. Some are chronically short of cash; others are the opposite, rolling in dough.
Banks heart the latter because they'll always make good on the overage and fees.
So to make these whales more comfortable (and profitable), some banks are using sophisticated computer software to analyze the income and spending activity of their customers in order to raise or lower their overdraft limits accordingly.
Salin Bank and Trust in Indianapolis is one such bank. It once imposed overdraft limits of $500 to $750 across the board.
Now Salin cuts some customers no slack at all while allowing others to overspend by as much as $5,000, all based on their profile as interpreted by Intelligent Limit System software from Velocity Solutions.
Just to make the game a little more interesting, your limit can change from day to day based on every Mars bar or mansion you purchase. Curious customers can see what their limit is any given day by phoning the bank.
Velocity chief overdraft strategist Erik Hoghaug told American Banker that unless banks customize their overdraft limits, they stand to lose 10% of the revenue they could be making on overdraft fees.
James Van Dyke, president of Javelin Strategy and Research, a California company that studies the industry, admits the software can support "a good fee-generation solution" but insists it's not predatory.
"These are people who are consciously choosing to be unconscious with the management of their finances," Van Dyke says.
But these also are banks that are willing to spend top dollar to analyze, track and target said fat cats for the sole purpose of picking their nicely tailored pockets.
That still sounds predatory to me -- even if the oblivious rich can afford it.