What’s behind the Chase utility bill promotion?
Chase is offering $20 if you simply enroll your debit card in their bill-paying service and pay at least 3 bills. What is their motivation for doing this?
Chase is one of the banks that has been aggressively pushing customers to sign up for automatic overdraft protection for debit cards. A better name for this service would be punitive overdraft punishment. This has been a huge money maker for Chase in the past and they are looking to regain some of the revenue they stand to lose since new government regulations banned them from turning this service on for all new accounts, without customers being aware of it. Fees from overdrafts have brought Chase billions of dollars of income per year in the past.
This so called overdraft protection will allow you to use your debit card even when there is no money left in your account, at the cost of $35 per overdraft. Chase has been accused in the past of ordering debits and credits to maximize overdraft likelihood and revenue. While the new laws prohibit banks like Chase from having overdraft protection on by default, there is an important loophole: They can still opt to process automatic/recurring debit card payments, such as for a utility bill, even when it would draw your account below zero.
So why is having you sign up for bill payment with your debit card good for Chase? Automatic payments to your debit card are likely to cause your checking account balance to be recorded improperly in your checkbook.
Even the most diligent of people is likely to forget to account for recurring debit transactions either before or after the fact, which means that they will likely not plan for a sufficient balance for an upcoming debit transaction for a utility bill, or will forget to record it and assume their balance is higher than it is, causing an overdraft to occur (if they opted in to overdraft protection). Either way, Chase greatly increases the likelihood that they will capture significant overdraft fee income by getting customers to sign up for automatic payments on their debit card.
This is not a good deal. If you want to automatically pay your bills, use a credit card, which won’t have the same problems.
Bad bad Chase, Fees & charges | admin September 21, 2010
