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The Price of Ignorance (Gwen Moritz Editor’s Note)

3 min read

I was chatting with a bank employee the other day, and he asked me why we hadn’t written any stories about new regulations on "overdraft protection" that banks nationwide are scrambling to implement. Actually, we did a pretty thorough story about that issue back in January, but it’s true that we’ve devoted relatively little real estate to what this banker called "the bank story of the year" – unless, he allowed, financial reform actually does make its way through Congress.

I appreciate fully that banks are going to take a hit when the number of overdrafts and their attendant fees decline after the new regulation takes effect this summer. And I understand that fee income has become increasingly important in the low-interest-rate times in which we live. I also understand that some people really would rather pay an overdraft fee than have their debit card transactions refused.

I also understand that these changes are expensive for banks, and that bank expenses are ultimately paid by bank customers. But I like the new regulation for this reason: People should have to stop and think about whether a "service" that can run the price of a cup of coffee up to $20 or $30 is really in their best interest.

Overdraft protection, it seems to me, has enabled Americans to pay dearly for the privilege of indulging in very bad personal financial habits – living beyond one’s means and failing to monitor one’s spending. And we still can, but now we will be required to opt in – essentially to admit to ourselves that we plan to overspend.

Some people will take this option to just say no. Then a few debit card transactions will be refused – and some of them will be urgent. At that point, those customers will either decide to opt back in, or they will decide to get better control over the outgo of their income. And honestly, I won’t be surprised if, after all this effort and expense, banks will see their overdraft protection fees gradually creep back up close to previous levels.

As long as American consumers remain financially illiterate, they will remain their own worst enemies. And I have long suspected that keeping the consumer ignorant is part of some grand plan, although there are businesses that would benefit if we only bought what we really needed and only paid the best price for those things we did buy.

I am hopeful, however, that Arkansans will be at least a bit more financially savvy in the future. Starting this fall, Arkansas high school students will be required to take a unit of economics in order to receive a diploma. That’s a very good and overdue thing because an actual curriculum and an actual grade will be attached to a subject that heretofore has been a voluntary enrichment effort for both the schools and the children.

Wonderful nongovernmental organizations like Junior Achievement and Economics Arkansas are still out there working daily to help children of all ages understand and incorporate economic concepts in their daily lives. But the more we can demand that children learn about money, the better prepared they will be for the complex financial decisions they will face as adults.

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Speaking of Economics Arkansas, take a look at the ad on Page 21. The team from Arkansas Business – Associate Publisher Chip Taulbee, Internet Editor Lance Turner, Assistant Editor Sam Eifling and Yours Truly – won Economics Arkansas’ annual Corporate Trivia Challenge on April 22. It was the 10th Trivia Challenge fundraising event, the ninth in which Arkansas Business fielded a team, and the third in which we walked away with a win. Remember that when you wonder what kind of idiots are writing this stuff.

(Gwen Moritz is editor of Arkansas Business. E-mail her at GMoritz@ABPG.com or follow her infrequent tweets on Twitter @GwenMoritz.)

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