Bank Overdrafts: Outrageous Bank Overdraft Fees & Practices – How to Prevent Excessive Overdraft Fees

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:

1. 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.
2. 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.
3. 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.)
4. 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.
5. 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.
6. 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!