Banks Make More on Overdraft Fees than Loans
Common banking practices, such as clearing high-dollar debits before subtracting smaller debit amounts, holding deposits longer than necessary, and failing to decline overdrafts or warn customers at the checkout or ATM if they have insufficient funds, increase the number of overdrafts suffered by consumers
Your balance: $70
-$65 (Gas)
Your balance: $5
-$35 (Walmart)
Your balance: -$30 (plus $20 overdraft)
Your balance: -$50
-$10 (Starbucks)
Your balance: -$60 (plus $20 overdraft)
Your balance: -$80
-$5 (Grocery store)
Your balance: -$85 (plus $20 overdraft)
Your balance: -$105
-$5 (Sandwich shop)
Your balance: -$110 (plus $20 overdraft)
Your balance: -$130
And to add insult to injury, maybe you got paid that day and deposited the money, but the bank held the deposit until the next day for no reason that you can think of (also part of their bag of tricks).
So in this case, the bank's artificial policy of applying drafts in size order has hurt you plenty. If you complain (if) then there's a chance they'll reverse one charge as a matter of customer service. That still leaves you with a $60 debt to the bank. Compare it with this scenario where it was done in the order the drafts occured:
Your balance: $70
-$5 (Sandwich shop)
Your balance: $65
-$10 (Starbucks)
Your balance: $55
-$35 (Walmart)
Your balance: $30
-$5 (Grocery store)
Your balance: $25
-$65 (Gas)
Your balance: -$40 (plus $20 overdraft)
Your balance: -$60
Think I'm full of it? Check out this eerily appropriate Consumerist article posted today about a guy who's overdraft woes cost him $134 for a granola bar.Have two accounts: your main and a second. When you know you're short for the month and need a few hundred dollars to prevent the main account from going under, "borrow" against your other account instead of going to the Payday Loan scum. Go to an ATM and withdraw $300 (or whatever your overdraft amount on the other account allows). You'll get a one-time fee (usually $18-$25). Use that to keep your main account current.
When you get paid, put money back in the other account to keep it at about $0. This is way cheaper than paying a bunch of over-draft fees or using a payday lender. Just make sure your bank doesn't charge any monthly fees or "inactivity" fees on the second account.
Update
More on the topic from Consumerist.com.
Chairwoman Carolyn Maloney (D-NY) of the House Subcommittee on Financial Institutions and Consumer Credit is holding a hearing today on unfair bank overdraft fees and their impact on consumersShare This
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