Banks now automatically approve most debit card purchases and ATM withdrawals, even when the customer's account lacks the funds to cover them. A simple warning would give the customer a choice about whether to go through with the transaction and pay the average $34 fee.
Banks generally subtract the largest payments first from the day's transactions regardless of the order the debits came in. If the customer comes up short for the day, this high-to-low ordering increases the number of overdraft fees the bank can charge. Banks can also increase debits by holding deposits longer than necessary.
Many Americans are finding it more difficult to keep up with the bank practices and avoid overdrafting, especially those who live paycheck-to-paycheck and find themselves hovering near a zero balance. An overdraft can trigger a domino effect, sending consumers deep into the red.
Want to protect yourself and others from abusive overdraft practices?
Take these three steps:
- Switch: If your bank or credit union will not let you opt out of a system that automatically approves your overdrafts without warning, for an average $34 fee per incident, switch to another bank or credit union.
- Link: If you can, link your checking account to a savings account or line of credit, which can be available at annual interest rates as low as 18 percent.
- Call: Call your representatives in Congress today and ask them to support laws to stop abusive overdraft practices.
How do today's bank overdraft policies affect everyday Americans?