So without overdraft coverage, what happens if you bounce... do they just not process the transaction?

This could get sticky, like say someone goes to a restaraunt and eats a meal then they can't pay with their card. That would probably be the same penalty as shoplifting or petty theft, right?

Or would they let it go through and then count it against you as a bad check?

I'm not against the banks charging fees because allowing the transactions to pass keeps consumers who DO overdraft out of some sticky legal situations like that. The problem is that the fees are not proportional to the amount of overdraft because the fees are assessed at a flat rate. Like if you overdraft by $0.01 its a $30 fee

And most banks, like Wachovia, process the largest transactions first. Say you have a bunch of little $2 transactions and a big $100 transaction, the big one will pass first and the little ones will come after. So if you have an overdraft, you get charged the flat rate fee for every little $2 transaction that wouldn't pass.

Its fucked up that someone can overdraft by $10 and rack up hundreds in fees. But the banks DO have protections for consumers, like they can link your savings account or credit card to your checking so it will cover the overdrafts and you won't get charged fees.

Banks aren't supposed to make their money through fees, banks have traditionally made their money by collecting interest on the money they loan out. When you put money into a bank, you make it available to that bank to loan out to other consumers and earn interest for the bank.

I don't have a number handy for the amount of money that banks are making off of overdraft fees, but I know that its a lot. And if any lobby has the influence to get its own way with congress, its the banking lobby. So this is something I'll be watching closely. I'm in favor of reform to a point that it protects consumers, but if the banking industry has too much influence on the final product, we may end up with something worse than before.