Avoid overdraft fees, save big money
The FDIC survey of overdraft fees released today confirms what consumer advocates have been saying for a long time: automated overdraft programs are big money makers for banks.
These are programs where banks automatically cover you if you overextend yourself, but hit you with a sizable fee for doing so. It used to be that lenders would just return your check or wouldn't let an electronic transaction go through if you didn't have enough money in your account.
The FDIC surveyed 1,171 banks. It found:
- Overdraft fees range from $10 to $38, with the median fee at $27.
- Banks earned $1.97 billion in 2006 from overdraft-related fees, making up 74 percent of the service charges collected on deposit accounts. Put another way, overdraft-related fees accounted for about 6 percent of the banks' total net operating revenues.
- Most of the banks that automatically cover overdrafts when customers make ATM withdrawals of debit-transactions at stores only told customers they didn't have enough money in the bank after their transaction was done. Only a small percentage notified customers beforehand, allowing them to cancel the transaction and avoid the overdraft fee.
- Consumers age 18 to 25 are most likely to trigger automated overdraft protection.
Banks say consumers like overdraft protection because it prevents embarrassment. But given the stiff fees and the fact we're in a recession where every dollar counts, a little embarrassment is worth saving as much as $38.
The FDIC says it conducted the survey so it can get information that can help shape public policy.
Comments
NOOOO!!!!! I just read my Sunday paper and learned that Dan Thanh Dang is leaving. If she's still there, tell her I LOVED her column. With all due respect to the rest of you (and you all do great work), this is yet one more reason the Sun has given me to stop buying it. It's really so, so sad to see what's happened to that paper.
Will the last one of you to leave please turn out the ligths. ..
Yes, we miss Dan Thanh, too! I hope you keep reading the paper, though. eileen
Posted by: WildBillFan | December 2, 2008 1:54 PM
I've switched to a bank that doesn't allow you to overdraft at the ATM,hence no huge fees. I just couldn't resist getting that cash sometimes when i wanted it. I suffered a lot of overdrafts but have learned my lesson.
So, let us know which bank doesn't automatically cover overdrafts? thanks, eileen
Posted by: Don | December 2, 2008 2:26 PM
Eileen-I switched to Wachovia. I don't have overdraft protection and you can't withdrawal more than your available balance. Hence,you can't get yourself into overdraft trouble.
Thanks. Now readers know at least one lender that can help you avoid overdraft fees! eileen
Posted by: Don | December 2, 2008 3:04 PM
I personally just stopped dealing with banks all together and started to use MasterCard and Visa cards wha you can pre load and direct deposit money onto. It has given more control over my spending, and saves me on those horrific overdraft fees you get with these banking institutions.
Posted by: The I Junkie | December 2, 2008 3:43 PM
That comment about Wachovia not allowing at the atm overdraft is not accurate atleast not in Maryland. I have done it on numerous occasions in amounts up to 500 dollars. The atm kindly warns that the transaction will put the account in overdraft if you choose to continue but it most certainly does allow. So either it varies from state to state or this is something new they offer but i did it just 2 weeks ago, so Wachovia is not OD fee safe either.
MommainMD, I wonder if this is a specific kind of account or account setting that you could request (if overdrafting is something you *don't* want to do ... so you won't make the mistake accidentally). --- lfk.
Posted by: MommainMD | January 10, 2009 11:55 AM