Bank Overdrafts: Outrageous Bank Overdraft Fees & Practices – How to Prevent Excessive Overdraft Fees
By Dr. Joyce Starr | January 10, 2010
Filed under Banking Rights, Economic Rights, Topics & Guests
The Rights Radio Self Help Hour features outrageous bank overdraft fees. Consumers are being raked over the coals by overdraft rates and by the reordering of debits to increase fees. Show Date: April 9, 2009
Rights Radio financial guru Joe Stallard joins me in identifying ways to prevent or reduce exorbitant bank overdraft fees.The streaming replay is available below.
The Federal Reserve’s website has been hit with repeated complaints about unexpected overdraft fees, exorbitant overdraft fee rates and the reordering of debits to increase fees. Consumers complain about being raked over the coals and about the “reprioritizing” of their transactions.
The bottom line: We’re told that “bailout” banks have more cash stashed away then they did prior to the banking crisis – and your overdraft fees are only making them richer.
Discover key steps you can take to prevent exorbitant bank overdraft fees.
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POST UPDATE: January 2010!
This show and post generated many comments and questions! I promised you an update and here it is:
- Many banks provide instant overdraft protection and charge $39.00 every time you exceed your balance. A number of banks have “reportedly” agreed to limit how many times they will charge customers on a single day and also allow them to opt out of “instant” overdraft protection. Call your bank and ask about their policy. Get it in writing if possible. A bank that permits up to five overdrafts per day, but refuses to limit the number of times they can charge you should be avoided.
- Best Choice! Ask for FREE overdraft protection. If they grant it, the bank is supposed to phone you and allow you a day or more to cover the short-fall at no charge. (Make sure they do both.) Alternatively, sign up for true overdraft protection linked to your savings account or credit card. You may still incur a fee, but it should be much lower.
- The big problem arises when banks process your largest expense last on a given day, rather than in chronological order. The first check or charge might be $10.00, the second $20 and so on. No problem – no overdraft. But when the $450 check hits, you’re out $39 and in the red. The solution: Make sure that your bank processes your transactions in chronological order. (CNBC personal-finance expert Carment Wong Ulrich, author of “Generation Debt,” Parade, November 15, 2009.)
- Use your debit card sparingly when you travel overseas or purchase online from a company located outside of the United States, because you can incur a 2 to 3 percent fee per transaction.
- Choose a bank that requires little or no minimum and thus no penalty if your account falls below a certain level. Many banks provide free checking with no minimums for seniors and students.
- Ask for a brochure or written statement re clearing out of state checks. Don’t assume that the check will clear in 24 hours. Banks only count business days versus calendar days so that they can use your money for free, (naturally).
To your empowerment!
A great way to ensure you prevent bank overdraft fees is to write all your transactions in your checkbook when they occur and ensure you do not do a transaction if it will make your balance drop below zero. By doing this you should avoid overdraft fees and it will not matter that the bank processes your transactions from highest to lowest.
Thanks so much for the helpful comment!
Doesn’t matter how well you keep up with it. If your significant other uses a debit card – and even though you have 40 dollars in the account and they do a 41 dollar debit – then you are a dollar in the red. So everything that has been taken from your account but is considered on hold will acquire a 35 dollar OD fee plus you will be charged again for each item on hold.
My bank tells me to get a savings account and in the event of an overdraft they will pull from this account. What a bunch of bologna. They put the transactions through before they pull the money. Then pop me three times at $35 a pop. What is this world coming to? Our banks are robbing people blind. When is someone going to put a stop to this and help the little man?
Thank you Karen. It appears that few at the top really care. They’re too busy counting your money. Our stimulus money was used in part (or large part) by the banks to invest in stocks, pushed the market up and make off like bandits, while charging people like yourself $35 for every minor overdraft. It’s a perfect system. They were paid a handsome sum to keep the Little Man/Woman down.
I overdrew my acct by $4.00. The very next day I deposited 50.00 to cover the overdraft and no fees were posted to my acct yet. They waited until my acct had $3.21 left in it, then charged me a 10.00 overdraft fee, which put my acct in negative again. Now I get hit with a 35.00 fee twice. Then an extended fee because I didn’t pay their 80.00$ within 2 days. Unfortunately I refuse to pay 115.00 in overdraft fees for a 7.00 overdraft. This doesn’t even seem legal to me. Is there anything I can do. I am a single dad with a paycheck to paycheck job and I need this acct. What can I do?
Hi Sean,
I asked Rights Radio financial guru Joe Stallard to reply to your question. You can find his suggestions on the removal of unfair bank charges here.
This happened to me today. I am a college student and had to use my debit card over the weekend to get gas and a couple of other small charges. These charges do not process until Monday at midnight or whenever the bank runs their books. The charges showed up in the correct order in my account at first and would have led to one overdraft fee if processed that way. My bank restructured the charges putting the largest through first and then charged me three separate overdrafts for three charges under 7 dollars. The kicker is that yesterday afternoon, which is the earliest I could get to the bank, I deposited a 1400.00 dollar check. (Where is the risk for the bank in this situation) There is no excuse for charging me 100 dollars in fees when the money is sitting in the bank.
Thanks for sharing your story Brandon. It’s an important warning.
Joyce, are you saying that nothing can be done about these exorbitant NSF fees? What can the Public forum do to speak out against this robbery? What are our rights? Please advise. Thank you.
Dear “Waiting2010,”
There have been some positive developments re our rights (or so it appears). I will do a new post shortly to update our readers and will advise you when it’s live. Thanks for your question!
I watched a couple of weeks ago on my computer because I have direct deposit and had written a couple of checks, The 2 checks were “courtesy paid “for a charge of 20 dollars each at 6:40 pm and direct deposit was entered at 6:45 pm. I called the next day and told them they were manipulating my account. The bank denied doing so, yet they received my direct deposit at 2:45 pm that afternoon. If that’s not manipulation, what is?