Sick of sneaky bank fees and extra charges? Here’s my own personal story on how I deal with these charges.
Tonight after work, I stopped by my neighborhood grocery store and picked up some items for dinner. I got into the checkout line and swiped my debit card with the confidence that comes from knowing I have money in my checking account to cover the purchase. A no brainer, right? Yes, but there have been times when I did not have this confidence because I was buying something at a bad time — either right before payday when I wasn’t sure I would have the money in my account that night (I notoriously don’t balance my checkbook) or when I knew for sure I didn’t have the money in my account, but used my debit card anyway, holding my breath that maybe the charge wouldn’t go through until the following day. I have paid the piper many times by not being careful with my debit card, racking up overdraft fees sometimes as high as $200-$300 a night.
The Trouble With Bank Overdraft Fees
Why I get charged overdraft fees. This is stupid, I know. How difficult can it be to manage your money? I have gotten into more trouble with overdraft charges than I care to admit. I perpetually make mistakes: I don’t balance my checkbook; I misjudge how much money I have in my account; I have the Scarlett O’Hara syndrome (I’ll think about it tomorrow); and I have chronic “busyness.” I am always on the run, I take too much on, and sometimes I forget to think about money and my checking account. There have been many times, particularly when I was in law school, when I could have transferred money into my checking account and prevented overdrafts, but I didn’t have time to think about money, let alone transfer it.
What banks do to vulnerable customers. There is no doubt I am responsible for my money and the overdraft charges I accrue. But banks contribute to my problem as well: They make it easier for me to mess up, and they profit from me when I do. Every night, they send through the highest charge first. That surprises people. But if you have $200 in the bank, and that day you made purchases of $110, $65, $25, $12, and $10 (for example), they will send the $110 purchase through first, causing you two overdrafts on the $12 and $10 purchases.
Had they done it the other way around, sending the smaller purchases through first, you would have only had one overdraft on the $110 purchase. Sneaky huh? I have had multiple discussions with my bank about this, and they claim their customers want the highest purchases to go through first, because they are usually the most important, and they want to make sure those are paid. Huh? Nice excuse! In most cases, the banks are going to honor your transactions anyway (the amount of the purchase and the overdraft charges come out of your next deposit). And I don’t think customers, including me, want more overdraft fees than necessary. At $27-$39 each, they do major damage. More and more banks are now also charging what they call “sustained overdraft” fees, which can be another $30-$35, when the initial overdraft is not paid back within a few days.
How To Escape Bank Overdraft Fees Minus The Overdraft Protection
What can you do about this? Here is a list of things I’ve done to escape the bank overdraft fees:
1. Keep up with your money and use your debit card sparingly.
2. Check your online balance everyday and make sure you know what items are pending to come out that night. If you see you will be short, you can deposit money into your account that day.
3. Make sure you remember what time of the month the charge will hit your account, if you are signing up for something that will be billed monthly.
4. Have a buffer. You can also keep some extra money in your checking account — $200-$300 — to serve as a buffer against forgotten or unexpected debit charges. If you are buying gas or renting a hotel room or rental car, be aware that a hold may be placed on your account for a while, and plan accordingly to avoid getting overdraft fees.
Some recent surveys have shown that people would like to have a choice about whether they get this overdraft protection or not; it would be great for consumers to be notified at the point of purchase that they are about to go into overdraft. The Consumer Federation of America supports the creation of a Consumer Financial Protection Agency to advocate for these kinds of issues. Such an agency would aim to bring a couple of bills to the forefront, which would allow consumers control over overdraft fees and would extend the 36 percent interest rate cap (that armed service members already enjoy) to everyone.
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Keeping a minimum buffer in your checking account makes the most sense to me.