Posted Tuesday, October 27, 2009
Last year, consumers paid banks and credit unions nearly $37 billion in overdraft fees, at as much as $35 per transaction. Banks say consumers are to blame and the high fees are justified. Consumer groups counter that banks game the system to run up more fees. Tuesday morning at 9, join Plain Dealer consumer affairs columnist Sheryl Harris for coverage of the battle over overdrafts and the future of regulation.
Avoiding Overdraft Fees (Courtesy, The Plain Dealer)
Avoiding overdraft fees
● Use direct deposit for your paycheck. You get access to your money faster.
● Use cash for routine purchases. Not only will you lessen your risk of overdrafts, but you’ll also have a better sense of what you’re spending.
● Ask your bank if you can opt out of overdraft protection.
● Consider linking accounts so overdrafts are covered by your savings. But try not to use it, because it carries a fee, albeit a smaller one.
● Track your debit spending. Online, you won’t see debits that haven’t yet cleared. Jot down expenditures—don’t forget automatic payments—so you know what you really have.
● Keep a cushion in your account. Mentally subtract that from your balance.
● Go low. Your statement may give you an “actual” and “available” balance—figure the lower one is correct. (But don’t forget to subtract pending debits or checks.)
● Consider having several accounts, one for major bills, another for spending, so that your most important bills aren’t threatened by an overdraft caused by a frivolous purchase.
● Set up alerts. Some banks e-mail or text you if your balance drops below a certain amount.
● Appeal charges. You may be able to get some or all overdraft fees erased if you complain.
● Planning to break up with your bank because of overdraft fees? Open an account with a new bank or credit union first. Leaving an overdrawn account can make it harder to open an account at another institution later.
SOURCE: Consumer Federation of America; American Bankers Association
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My bank has taken over $3,000 from me this year. It is like a shell game on New York city streets. “Oh mr D the deposit isn’t good for a few days but the withdrawl was counted instantly so we had to charge you a fee” or “oh im sorry but wired funds from out of state don’t count right away so we charged you $100.00” on and on no matter what I do they have a rule that trumps it. One time I made a mistake and mailed out a mortgage payment. The payment was cashed last out of 30 less than $10.00 transactions. My evil bank paid the largest payment and charged me $37.00 times 30 transactions for being overdrafted a sum total of $180.00 they took over $900.00 in fees!
When fees take over, common sense is left behind. So we have the recent lunatic mortgage lending that was done, not because anyone expected to be paid back on the loan, but because the loan itself, the transaction, no matter how unfair or stupid, would generate a fee for someone. Someone who has no stake in the underlying rationality of the transaction.
Welcome to transaction-based banking run amok.
I used to bank at US Bank because they are everywhere and have convenient hours, but I switched to a Credit Union because the overdraft policies were killing me. When I knew my account would be overdrawn I would deposit cash in the morning expecting this to be immediately credited to my account, but they would process it after the transactions had cleared at the end of business day and then process my credit resulting in an overdraft fee. It would show on my online account however that I had deposited cash followed by the transaction, so when I called them they said that the transaction was being held in their system and even though it did not show on my account they bank had counted that transaction. Too crazy. That happened three times and I closed the account and canceled the credit card. I’ve been satisfied every since! And a little richer too!
I just realized recently that even though I have overdraft protection from my credit card it was causing even more fines! Turns out that comes up as a separate “cash advance” on my card, which has a higher interest rate and CANNOT be paid off separate from the rest of the balance! I couldn’t believe it, they are charging me and for using it and then charging me interest when I would gladly have paid it off if I could!
I am so glad this overdraft fee issue is getting more visibility in the media. Kudos to Sheryl Harris and Senator Sherrod Brown. I have had thousands of dollars taken from me over the years by every conceivable trick and deception in the banker’s play book. I have been to five different banks and they’re all about the same. Here is one of their lastest tricks: Say your balance is $100 use your debit card on Monday to buy gas for $20 leaving $80. You check your account balance on Tuesday and it shows the gas transaction and a balance of $80. Friday you check your balance again at the ATM and it’s $100 somehow the gas transaction disappeared but you forgot you ever made the gas purchase on Monday. Thinking you have a $100 you make an $81 transaction to buy meds for your sick kid. Low and behold the $20 gas transaction conveniently reappears just in time to bounce your account. The $20 gas transaction only becomes visible in your account again when the merchant turns the transaction into the bank for payment. My life is very hectic and my wife and I spend from the same account impossible to maintain an accurate hand written register. Multiple accounts are a joke when you live paycheck to paycheck they are just another opportunity for banks to charge you fees. You just multiply your problems. When an organization uses tricks and deception to prey on the poor and needy I consider them the lowest form of life there is. My passion runs deep on this subject as one might guess.