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Watch Out For Sneaky Overdraft and Bank Fees

By Erik Folgate

Yahoo Finance has an article courtesy of Smart Money describing five sneaky overdraft traps that banks use on customers.

Times are tough for banks right now, so they’ll do anything to increase revenue, and bank fees are the easiest way to fatten their bottom line. According to the article, banks collected over $17.5 billion dollars in overdraft fees last year! That’s sick. It’s money thrown down the toilet on unnecessary bank fees. I have never paid an overdraft fee in my life. I’ve had it happen to me before. One time, I had three overdraft fees all at once, because of one of the traps that I will discuss later on. I just call up the Bank of America customer service, and they always end up taking off the fees. It pays to have an account with one bank for eight years.

Here are the article’s five sneak fee traps:

1. Debit and ATM Cushions

2. Reordered Debits and Deposits

3. Extended Overdraft Fees

4. High Daily Maximums

5. Funds on Hold

The reordered debits and deposits trap has tricked me in the past. For instance, if you have a debit for $5, then $45 dollars, then $50, then $8, and lastly $10, you would have two overdraft fees if assuming $100 was originally in your account. But, banks like Bank of America will “reorder” your debits from highest to lowest, and this would cause you to overdraft THREE times, rather than two. They justify it by saying that your higher debits are more important such as a mortgage payment, and they want to make sure those debits don’t bounce. It’s bull crap. It’s simply a way for them to maximize their overdraft fees.

Ways To Avoid Overdraft and Bank Fees:

  • Budget your money before you spend it. You’ll never worry about overdrafting your bank account if you spend all of your money on paper first.
  • Elect for overdraft protection with your savings account. Many banks will only charge you $5 or $10 dollars rather than $35 dollars to take money from your savings account to cover funds in your checking account if you overdraft.
  • Use more cash and less of your debit card. The debit card is a great product, but it can be very dangerous. It’s so easy to swipe it at will and not keep track of all of your purchases. Take cash out for miscellaneous purchases, entertainment, and eating out.

Avoiding bank fees and credit card fees are the easiest way to save money over a lifetime. Don’t be a part of the $17.5 billion dollar statistic. And remember, pick up your phone and call customer service if you do get an overdraft fee charged to your account. Many banks are willing to waive the fees to loyal customers!

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • http://madsaver.com Mac

    I’ve had overdraft fees in the past, but everytime I complained, they tell me I’ve been a good customer and waive the fee. This normally happens with my credit card accounts if I fail to pay the minimum amount on time (though I always pay the balance). Most are on auto-pay, so it’s rarely an issue.

    If this occurs on my checking account, there is no overdraft fee as $250 is automatically withdrawn from my line of credit account to pay the overage instead. Good method, but it has its disadvantages too.

  • MoniLove

    I have chase, my husband decided to give Bankof America an opportunity….bad choice. after 2yrs of many charges, direct deposits, they decided to pull a fast one over us when a check that was deposited and later that evening processed. We never got an alert as we always do, direct deposit we in at 3am as usual, so they processed the check at midnight and charged us an overdraft fee. We called CS and a few min shy before they close, the call dropped(yeah right). We called back”Now they are closed”. We went in person, the supervisor was so cold,unpleasnt”. My husband took his money out and we closed our acct. Denied us a courtesy reversal and showed NO empathy whats so ever. Me on the other hand have been with Chase for about the same time, and they have reversed up to 3 charges that I had received all at the same time. It was my fault and I was honest with them and they still helped me,provided great customer service and showed empathy towards my situation at the time. Now..Im bringing my husband over! Bank of America SUCKS!

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