Fine Kids With Fake Overdraft Fees

Real world overdraft fees are awful. They’re predatory, excessive, and sneaky. The average overdraft fee in 2022 is almost $30. Banks make billions on overdrafts.


That’s why FamZoo never charges overdraft fees. When your child tries to make a purchase using a FamZoo card that exceeds the current balance, the transaction simply declines. No fee. No harm. No foul.

Great, right?

Well, maybe not...

Our lack of overdraft fees can inadvertently encourage a bad habit. The absence of repercussions makes kids cavalier about checking their balance before purchases.

We see kids routinely racking up declines right and left. Last time I measured, over 60% of declines were due to insufficient funds. That habit turns toxic when your child graduates to the adult banking world.

So, how do you nip the overdraft habit in the bud? Parent-assessed overdraft fees.

Since you run the virtual bank at FamZoo, you can set the overdraft policy however you like — but, presumably it’ll be a bit more child friendly than the predatory banks!

For example, you might charge $1 for each insufficient funds decline after a first-time warning. Or, you could ratchet the amount up with successive violations, starting at 25 cents for the first overdraft decline and doubling it on each additional one up to a max of, say, $16 by the seventh violation.

Whatever your policy, turn on activity alerts for your kids’ cards. That way, you’ll know immediately whenever a card is declined due to an overdraft and can take the appropriate action.

To assess the fee, just click the minus icon next to your child’s account, include a description like “Mom/Dad Overdraft Fee”, enter the fee amount, and click/tap the Debit button. The funds will flow back to your parent card.

But, what if your kid’s card is sitting at a zero balance? How do you assess a fee to an empty card?

That’s where the magic of FamZoo’s unique card IOU feature kicks in. Go ahead and assess the fee to the empty card. It will be recorded as a negative card IOU displayed beneath the card’s balance. A negative card IOU tracks how much money your child owes you, the parent.

The next time you credit the card — either manually via the credit button or automatically through an allowance, chore, or interest payment — the FamZoo system will pay off the card IOU first before delivering any actual money.

For example, suppose your kid’s card has a balance of zero and a negative card IOU of $5 due to parent-assessed fees. Then, suppose a scheduled $10 allowance payment hits. The negative $5 card IOU will be eliminated, and the card balance will end up at $5 instead of $10. That’s because $5 of allowance was clawed back to pay off the outstanding $5 in fees

The bottom line: FamZoo automatically enforces your parental fees on empty cards unless you reset the card IOUs explicitly to let your kid off the hook.

If you don’t like the idea of assessing a monetary overdraft penalty, there are other options. You could impose a “financial timeout” instead by locking the card for a specified period. Or, you could reduce screen time or some other appropriate privilege for the week by the agreed-upon amount.

Do what makes sense for your family. It’s your bank.

As long as there are meaningful repercussions, your faux overdraft penalties will help prevent real overdraft fees in the future.

Bummer for banks...

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