The Great Overdraft Fee Scam

Unfortunately for most people who have checking accounts, the deck is stacked against them when it comes to overdraft fees. Since the bank controls what transactions go through first (whether they deduct the largest transactions first or the smaller ones), they control how many instances of overdraft you are charged for.

For example, say you have $100 in your account and you make a $3 purchase, a $14 purchase, then a $90 purchase. Your cost for overdrafting in this case would be $60 if your cost per overdraft was $30. But, if you made the purchases in that order, $3, $14, and $90, you should have only overdrafted once... right?

Wrong. If your bank manipulates the posting of daily transactions so they are deducted from highest to lowest in amount and the overdraft fee for each occurence is $30, your total bank fee for overdrafting in this case would be $60.

Overdraft Protection?

A large number of banks enroll customers in an overdraft "protection" program, which prevents checks from being returned as NSF (non-sufficient funds). The catch is, the bank allows the check to go through, which overdrafts your account and every purchase after that triggers another $30 to $40 overdraft fee. No matter how small the charge is, you will be charged a full overdraft fee. How much that fee is depends upon your bank's policy and whether they will allow you to unenroll yourself from their program meant to "protect" you from embarassing NSF checks is completely up to them and many will not allow you to unenroll at all. A $30 check can trigger over a hundred dollars in overdraft fees... or more.

The Solution

Think about how many overdraft fees you have been charged in the past 6 months. Add up the amount and if it's unacceptable to you, find out if you can unenroll from your bank's overdraft protection program, if you are enrolled in it. Your debit card will be declined if you have insufficient funds and checks may be returned for the same reason (watch out for bounced check fees at retailers, though), but predatory overdraft fees on your account will be no more.

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