After a screw up in my child support payments, which BOA made all the WORSE by NOT CREDITING MY ACCOUNT IN A TIMELY MANNER when a payment WAS made, I ended up with THREE items, overdrafting-- a TOTAL OF 50.00-- BOA THEN CHARGED ME 140.00 INCLUDING ANOTHER 35.00 FEE THAT WASN'T INCURRED UNTIL AFTER A cash deposit of $300.00 HAD BEEN MADE!
If i did it to my neighbor I'd be cuffed and hauled off to jail for LOAN SHARKING, call it interest, call it a fee, a rose by any other name... IT OUGHT TO BE ILLEGAL, ESPECIALLY WHEN THESE ROBBER BARONS ALREADY HAD A GOV BAILOUT OF BILLIONS HANDED TO THEM. I like their idea of "reforming themselves" what a LAUGH.
Wow that is SUCH an improvement "NO MORE THAN THREE OVERDRAFT FEES IN A DAY" might white of them.
Finally my child support hit the account TODAY, now I owe my adult son, $300.00 and they have used my child's support to SUPPORT THEMSELVES. Why does OUR government ALLOW THESE SUBHUMAN GREEDY PIGS to operate like this, they literally STEAL MONEY from low income people, and get away with that. Let a low income person go in and steal from them like that, and they get locked away for decades. I'm sick of the double standards, lol.
They are LOAN SHARKING and exploiting those who can LEAST afford their fees, while lining their own coffers with BILLIONS IN GOVERNMENT HANDOUTS, that they REFUSE to help ANYBODY, but themselves with.

I think this charge is bullshit. They incurred no risk because they DID NOT PAY THE MERCHANT YET, the merchant just has a hold on my account.

As one who makes a living out of statistics, this type of stat is one (of many) that cause me to have convulsions.

It is a meaningless stat. If we remove these 10%, then the next 10% will be responsible for x% of the remaining overdraft fees, probably another very high number.

It's more of an alarmist technique designed to elicit emotion rather than a reasoned, objective measure.

Why is it so hard for so many to understand that private business's have the right to price their products however they want and YOU have the right to chose to do business elsewhere if you don't like the prices/practices.

We don't need to regulate this, we need consumer's to regulate it by refusing to do business with banks that they feel have onerous fees.

I thought this was a site about empowering consumers, but most of the comments seem to be about making excuses for BAD consumers that usually cost the rest of us in the long wrong.

@NatalieErin: I know how banks work, but as I mentioned in a previous post they don't make any money from people who are consistently at or below $0 as that gives the bank no money to loan.

Years ago banks didn't charge such large fees, but they also charged for every single check which was written. It wasn't a lot, but it was something like $0.10 per check with a monthly fee just to have the account - and that was before the days of debit cards.

So think if you use your debt card 50 times a money and write 10 checks for a total of 60 transactions. That would probably cost you $6.00 in fees - but with inflation that 10 cents per transaction would probably be 25 cents by now, so it would probably be closer to $15 plus the normal monthly fee bringing the total to around $20 a month for a typical user.

So yea maybe you wouldn't get slapped with a fee if you overdrafted, but you would pay a fee each and every month to simply have your checking account, and even more feeds to actually use it.

When "free checking" accounts became the norm, banks found other ways to recoup that lost revenue, but it isn't like they just invented new ways to make money. In fact there were always fees for bouncing checks, and inflation adjusted I'm not sure the fees are any higher today than they ever were.

The real difference is, people have this mindset now that the bank is evil and they don't think they should be charged money for failing to monitor their bank balances. I'm not sure what their solutions are, but if the government steps in and tells banks they can't charge overdraft fees, you can bet banks will start mandating minimum balances in accounts.

Long story short - all those people who keep no more than $100 in their checking accounts will no longer be able to have checking accounts. That might be a good thing for both parties.

That said; I don't agree with massive fees levied by some banks but keep in mind these fees are typically a bit high partly in order to encourage better money management on the part of a consumer. Of course this is second seat to profit.

@DaveDidNotPay: Maybe they do make a fortune... I can't really say since I don't know what their books look like, but the thing is - shouldn't banks be allowed to charge what they want?

Is this no longer a free market?

If you don't like the fees - take your money (what little there might be) to another bank. They aren't easy to find, but there are banks out there that allow people to opt out of over-limit fees etc and they have been mentioned on this site in the past.

However, people that routinely carry small balances in their accounts do cost the bank money. Not only are there the overdrafts, but the actual cost to manage the checks and debit card transactions costs the banks money and time. If that person uses ATMs or deposits checks in the branch via a teller - it costs the bank money.

You do realize how banks make money right? They use the money in all the accounts and loan it out where they can make interest. If they have 100 customers who all carry no more than $50 in their accounts at any given point, and those same customers are the ones who are going overdrafted on a regular basis, and the bank is mandated to keep a certain percentage of the balances on hand for customer use, that really doesn't give them much to loan out now does it.

I guess I just have a hard type being sympathetic to a fee which is so easily avoided by using common sense. In over 20 years of having a checking account I have never been overdrafted or had a single check bounce, and it has zero to do with just being lucky.

@ARP:

1) I bought some furniture and they charged me twice.

Simple - that was an error by the furniture store. You need to work with that store and your bank and get your fees refunded. It might be a hassle, but at the end of the day it won't cost you any penalties.

2) I was signed up for some credit report program I did not ask for.

I'd need to have a litle more background info for this one. Are you saying this is fraud? Because if this is fraud and you didn't ask for it, you can have fees refunded. If on the otherhand you simply checked a box or agreed to something without reading the fine print then it would still be your error, and thus your fault if you became overdrafted because of it.

3) The bank put a double "hold" on $50, when I went to the gas station.

Do what I do and what many others do. Build a buffer in your account so these types of issues don't impact your ability to shop and do regular business.

@morganlh85: If the bank is at fault the fees are refunded, so that is a moot point now isn't it.

I didn't think I needed to make that point clear, but obviously I was incorrect.

As far as knowing how much money is in my account I never get to a point where I need to worry about $5. I don't even worry about $100 or $200 because I always - and I do mean ALWAYS - keep at least $500 in my checking account as a buffer.

I've had a checking account since I was 14 and I honestly don't remember a time where I ever had less than $50 in it. I've never bounced a check or had an overdraft, and I've always had an emergency reserve fund built in to prevent those types of things. People can talk about living paycheck to paycheck all day long, but a little personal responsibility and money management goes a long way.

@DaveDidNotPay: Only a bank employee? No - how about someone who believes in personal responsibility.

You don't want several hundred dollars in fees because you don't have the money in your account? Simple - DON'T SPEND MONEY YOU DON'T HAVE.

Why is this so hard for people to understand? Are banks in the business of overing zero interest loans? I didn't think so.

@DepressedMan: The simplest definition is that an overdraft, or overdrawing an account, is when the amount of debits exceeds the funds in the account. That is, the account holder has spent more money that they have in that account. What chocolate1234 is describing is properly termed "overdraft protection". Some banks set up overdraft protection with a savings account, some offer reserve lines of credit, some offer both. And chocolate1234 is correct that those overdraft protection options aren't always available to account holders, either because they have no savings or because they don't qualify for the reserve line of credit.

@Costner: Aside from what other people have said, banks don't need to institute fees to make money. That's not the basic business model of a bank. They let you keep your money at their institution, either in a no-interest checking account or a low interest savings account. But they don't throw all that money in a vault and let it sit there. Your money is being lent out to other bank customers at much higher interest rates than what you receive for your cash accounts. Hence, profit. If you agree to let them keep your money for a long period of time, like in a CD, you get more money in interest because they can assume they will receive more money in interest.

There was a point when banks were profitable without charging huge fees. They could go back to that business model, if they were willing to except a lower (but still healthy) profit margin. They could even still charge fees - just keep them reasonable.

@ShruggingGalt: Criminal charges? Where do you live that bouncing a check is a crime?

@chocolate1234: All right, then. It shouldn't be a problem to provide an opt-out if most people want this courtesy. The banks won't even see a significant drop in income, since the service is so high in demand!

@schernoff: No, they're not the same thing - I've done both in a previous life.

When you overdraw, the bank covers the face value of the check, so the merchant (or whomever you gave the check to) gets their money, and then you owe the bank. You are overdrawing your account - withdrawing money over the amount you actually have.

When you bounce a check, the bank refuses to honor the face value of the check, so you still owe the merchant money,. Sometimes you owe the merchant more money, because if they deposited the check at their bank and it was returned for non sufficient funds, their bank usually charges them a fee. Merchants will sometimes call bounced checks "returned checks", because that's the name on their end (when the check is returned to their bank from the issuing bank).

@EdenBabararacucudada: there are multiple forms of overdraft protection depending on the bank or CU.... you can link a savings or money market to the account and use your own money via auto transfer to cover the items or you can have a line of credit or credit card with that bank linked to your checking to cover items - the cost of having this overdraft protection is much much cheaper than paying the overdraft fee- - also when you open a checking account you get a huge stack of "disclosures" which almost nobody reads but they clearly state the overdraft fees - - that is enough just knowing what they charge for me to be very cautious and keep track of what I have to avoid them........

@Ronin-Democrat: I believe the bank charges the fee based on "risk" which is a huge factor for people who are constantly overdrawn - eventually people in that situation often "charge off" those over drawn accounts and the bank is out all the $ paid to cover items before fees....

@Whiskey Tango Foxtrot: Some not all - - banks can deny transactions but to an extent..... they can only deny charges that show at the time of purchase funds are not available - but if you are for example paying at the pump for gas and you have $20 in your account - because the gas pump/station has no idea how much $ in gas you intend to pump, it reserves $1 from your account and like magic the transaction is approved --- to bad you just pumped $25 dollars in gas - result- in three days or so when the gas station batches it's machines your account is overdrawn and you the bank is charging you $35-$40 per item Overdraft fee... same thing with some online purchases automatic payments etc.....- - so all in all if you do things a little old fashion and keep a ledger balance you can avoid almost all overdraft fees - as for cases where you could be "double" charged thats a little different and it happened to me with my auto insurance once as well so I called my auto insurance co. and made a complaint - they refunded me the "extra" payment and my 37.50 overdraft fee - - -

@Eyebrows McGee (now with more baby!): Overdraft that's not attached to another account is what used to be called "bouncing a check".

Going overdrawn once costs £70 - that's a sizable chunk of my monthly wages. The bank tries to play it off as less by charging £35 twice at two intervals during the month, but it's still £70. Fucking outrageous.

Usually when it's that negative it's intentional.

Plus, sometimes fees are really sneaky, and the customer honestly doesn't know they've been charged. This happens a lot with check deposits. They're often put on hold for a couple days before the funds are actually available in the customer's account. If they touch those funds before the check is available, they'll get hit with a fee.

Banks definitely need more regulation, because some fees are intentionally tricky. On the flip side, some customers pull shady stuff (writing bad checks, depositing them into the bank, and spending the funds before the bank realizes the check is bad), so that's theoretically part of the reason why banks hold funds.

And to clarify, just because I worked at a bank doesn't mean I AGREE with all of their policies. I do think overdrafts are too expensive. At the same time, many, many, MANY of the people in this cycle simply refuse to take responsibility for their finances.

@tbax929:
I use Bank of Montreal(BMO) it's a Canadian bank obviously.
I really like how they have their online banking set up its very simple and easy to pay bills on and such and they offer a paypal type service but it only works in canada.

Maybe you get it, but no... about 10% of consumers don't get it. As some people have already indicated, the scenarios you've described are exceptions. Banks are not raking in $35 billion/year in overdraft fees due to transaction errors.

(Honest question, I don't understand this). Thanks for the replies.

For the rest of us, ING is the win.

Banks are making a fortune off overdraft fees. This alone should help clue you in that the fee they are charging is not at all proportional to the amount of risk they are taking.

Banks would have us believe that they are making extremely high-risk investments by allowing people to overdraft their accounts, justifying the large fees. How about the banks provide records of how much of that lent money is never recovered? I have a funny feeling that given the ROI and the risk involved that most everyone would be jumping to invest in overdrafts if it was something available on the open market.

High-risk my butt. Especially when they're charging nearly $40 when someone makes a $2 purchase- and the consumer can NOT opt-out. Ridiculous.

I just hope the paradigm shift in American culture that we've seen over the past months will not allow banks to continue doing this. We can all move our money to banks which do not engage in such predatory lending practices. Sooner or later these banks will either change their practices or they will fail to receive additional bailouts and then they will FAIL.

Exactly. No way to opt-out.

Only a bank employee would be able to look at someone who just racked up several hundred dollars in NSF fees with small $5 purchases on their debit card and tell them that "it's a service offered for them so they didn't have to face the embarassement of having their debit card declined."

Flagstar bank does that. It's opt-out. They charge a normal NSF fee every time that $1,000 is dipped into. Furthermore, they offset account balances by $1,000 so it looks like you have $1,000 more in your account than you actually do. On their website they show "available" and "actual" balances with one being the "padded" balance but in their email notifications they show only the padded balance with the label "balance" next to it.

Charging a fee proportional to the amount might require the bank to adhere to truth-in-lending laws, disclosing insane interest rates. Besides, the bank would make less money.

If you think that banks are concerned with "earning interest" on accounts then I have to ask if you have done any research into this matter whatsoever.

The research I've done indicates that a person who overdrafts their account once a month provides earnings similar to those of an account holder with $12,000- and that was back in 2003: [www.consumerlaw.org]

I imagine the $12k is higher today.

At the end of the month, I had 9 cents of interest deducted from my checking account. ING won me as a customer for life!

1) You used a debit card for the transaction, giving some other party the ability to withdraw money from your account, or place a hold on funds in your account, thereby decreasing the available funds in your account
2) see #1
3) see #1

Had you used a credit card, these instances would have merely decreased your available credit - a much less problematic situation. Granted, not everyone can get approved for a credit card, but there are far too many people who use debit cards in place of credit cards that they do have or can get.

@TakingItSeriously: The bank that I use (a credit union) does this. You sign up for a line of credit and any overdrafts go against the line. The interest is 8% (annual rate).

What's more, these folks need to be given practical advice on making budgets and balancing checkbooks. As long as you give them excuses (always errors, re-ordering charges, timing deposits,etc.), chronic overdrafters will never correct the underlying behaviors that cause them to overdraft.

This from a recovering overdrafter.

1) The bank would force the vendor to eat the fees
2) This is fraud, covered by your bank
3) Bank error, they should eat fee (although gas stations regularly institute large holds).

I strongly doubt the folks who chronically overdraft are constantly getting hit with vendor/bank errors. In short, someone needs to tell them to tighten their spending and balance their checkbook.

@Scoobatz: I love how these people come in with the ultra-helpful comment, "just don't spend more than you have." We get it. So, please explain the fault process in these instances (which have all happened to me):

1) I bought some furniture and they charged me twice.
2) I was signed up for some credit report program I did not ask for.
3) The bank put a double "hold" on $50, when I went to the gas station.

I went inside and asked what happened. It turns out I had accidentally overdrawn my checking account. The manager looked at the fact that my savings account was orders of magnitude larger than the overdraft and just let the checking go negative. I asked "So if I had overdraft protection, how much would it have cost me?" His answer, after punching a couple buttons on a calculator, was "Twelve cents." Basically, a rate on the amount and duration, like Hypoxia's experience with Ing Direct.

In a case where you have money clearly available to cover the overdraft, really, that number makes a heck of a lot of sense so I got the overdraft protection for next time (there hasn't been one since).

The thing that stood out in my mind was that the manager had the sense to just let the account go negative instead of bouncing the check, because I clearly _could_ have covered it.

Sorry about the vague details. It was fifteen years ago. It isn't "Oh thank god Bank of America paid my overdraft and charged me a $35 fee! What would I have done without them?!" but it is "Oh thank god this precursor to Bank of America paid my overdraft and didn't actually charge me the fee! What would I have done without them?!"

Instead of giving folks excuses, how about we encourage them to actually spend 1 hour a night posting and managing their transactions?

What are YOU doing to bail out the banks??!

@morganlh85: What you've described still appears to be the customer's fault, not the bank's. Were you hoping the bank was going to forget about your husband's $5 purchase two weeks ago? It's still money spent. This could have been avoided if you balanced your checkbook.

But if the bank is using these fees to pay for the services to other account holders, then that is part of the evil transfer of the wealth. These fees need to be limited to not more than real processing costs for such fees, with a penalty of jail time (30 days per offense) for the bank C-level officers.

A few times my husband has bought something for like $5 with a debit card, and National City will take two weeks to actually take it out of his account. He calls to check his balance, and it says $xx.00, so he spends the money, only to find out he ACTUALLY had $xx.00 - 5.

@TakingItSeriously:

Because then it is a loan and usury laws apply.

I bank with National City. My transactions are re-ordered quite often. The solution, since my credit is low post-Bankruptcy? Cash. I withdraw large sums of cash to cover the basics - my mortgage, groceries and childcare. These are deducted from my account first before any payments are made electronically to other companies. Since changing over to this practice in April, I've had two overdrafts, but it was honestly my fault versus a series of transactions being reorganized based on dollar amount and the bank's mood at the time.

I just switched to Ing Direct because they seem to have a much more fair way of handling overdrafts. Instead of whacking you with $37 for each one, Ing Direct charges you a fair market percentage and treats it as an overdraft loan. That way your penalty (deserved or not) is more proportional to the amount of the transaction.

If the bank lets 5 deposits go through on an account with a negative balance, and each one is $100, then they'll make roughly 35x5=205 on overdraft fees, but will have lent out 500-205=295 to the customer. And then the bank is not earning interest on that customer's account for a LONG time because the most likely fiscally irresponsible person isn't making enough money to get their account back into the green.

I think banks could still survive on no overdraft fees, or at least letting people opt out of the service. I definitely would. I keep a close eye on my account and haven't overdrawn it in a while. The last time I did it was not something I could control. So I'd rather opt out of the whole thing.

Also, bouncing checks (another user mentioned bounced check fees): who does that for everything anymore? I do it for church offerings so it gets recorded, that's pretty much it. Or at a place where they charge a fee for using a debit card. I use probably 5 checks a month. I think the bigger culprit is debit cards.

And where are you living that you have a landlord that will evict you that quickly? I appreciate your opinion but let's not be dramatic.

1) we pay account holder overdrafts but instead of charging a flat 35$ fee, we charge 19% interest on the amount.

2) we provide awesome customer service

and

3) we don't try to weasel you out of every extra penny we can take from you

Any venture capitalists want to invest in me?

Who wants to switch to my bank?

@balthisar:

Oh please.

You get reported for writing bad checks if you don't make good on them. Unless you make a habit of overdrafting all over the land, then you are out the $70.

It would also help if the banks didn't reorder credits and debits so that the credits land last. (after they've applied all those profitable fees)

Second - Not everyone that overdrafts takes out pay day loans or is fiscally irresponsible. It could be something simple as forgetfulness or a transaction that was an error that can cause you to overdraft and than be hit with hundreds of dollars worth of fees. Even if it is not, not everyone in this country makes 100k a year, some people are living pay check to paycheck and are on a seriously tight budget. All it takes is one bump in the road to spiral out of control with overdraft fees.

I am happy that you have never been subjected to an overdraft fee but please don't be judgmental on people that have had them occur.

@EdenBabararacucudada:

By declining the loan application you declined the "overdraft protection". They provide a $1000 line of credit that they use if you overdraft. You only get hit with charges if you overdraft more than $1000.

Since you declined it, you had $0 protection. Any overdraft gets a fee.

Uh, okay... this isn't quite the same, but if I were to overdraw my Chase account, I'd be thrilled to pay $35 rather than have the check bounce, incurring a $35 bounced check fee from my bank *and* the payee, then being reported to the county prosecutor for passing bad checks, then having to hire a lawyer and pay legal fees.

Perhaps I should get off my ass and open an account at my mom's credit union. If you go over your available balance there, they transfer the difference from your savings or a credit card, and send you a letter letting you know what happened. All for my favorite price: free.

@frank64:
It's fine for those who can get approved for the credit line. Not everyone can.

@Zenatrul:
Which bank is this? It sounds way better than mine!

Everyone is quick to blame the banks, but it seems it isn't the bank who is spending money they don't have. The process is simple - keep an eye on your balance and don't write checks or use your debit card when you have no money.

I know this is a hard concept for some, but hoenstly overdraft fees are most often simply a self-imposed tax on the stupid.

Also, think of the alternative if banks didn't charge overdraft fees. First, you can kiss that "free checking" goodbye and it will be back to the days of charging you for each check or transaction. Why? Because banks can't process checks or debit card transactions for free, and they can't provide short term loans to people who overdraft their accounts for nothing...because that would equate to them losing money, and other than the federal government, no business can stay in business if it loses money.

Second, currently that auto withdrawal mortgage payment or that automatic car payment that comes out each money would be rejected if your bank doesn't allow overdraft fees and you are a little short. So now instead of a $35 fee, you are delinquent on your mortgage or car payment which will most certainly charge you more than $35 for a late payment.

So yes $35 seems like a lot when you charge a bag of Skittles and a Mountain Dew to your debit card when your balance is only $1.20, but it doesn't seem like so much when you withdraw $1200 for a mortgage payment when your balance is only $400 and your paycheck doesn't come until the following Tuesday.

Again - if you don't like the fees a bank charges for overdrafts you have two choices. Either find a bank that won't allow you to overdraft and suffer the consequences, or start managing your money better so you don't ever go over your limit.

I'd bet these same 10% of people are the same types who try to solve their financial problems with payday loans too - so sometimes you just can't teach common sense to those who suck at it.

@Trai_Dep: With some banks you can, but don't go crying to them when the check you wrote to pay rent bounces as your landlord assesses you a $150 fee and then evicts you.

@SuparnaBabalas:

Totally. I had an issue with T. Rowe Price where they steroided-out my IRA auto-max and pulled over $600 in "contributions" two days before pay day. My CU, of course, green lit the charge, then hit me with a $29 "convenience fee".

The kicker was that TRP wouldn't wire the money back because technically it was "user-error". So then I have to treat it as a distribution ya ya ya...

If only the CU had denied the charge, we'd be alllll good.

And I got handed a loan application.

Okay, that's not what I was expecting. So I said "no thanks"- I didn't want a loan, I just wanted one or two automatic transfers every few months.

Several months later, I went over- hit with a £50 fee for my trouble.

So to people who say "you signed up for overdraft protection! What are you complaining about": No, I didn't. I explicitly did not sign up. I did not want the service. I walk around with four different ways of transferring extra money if I ever need it, why would anyone sane want a "yes, please take £50 from me if I don't have £5 at the end of the month" service?

For those that don't have alot of money they make financial gain difficult by keeping their account in the negative and tacking on more fees until the account is in the black. The new deposits usually come from paychecks which probably aren't a large amount to begin with. These seems predatory to me.

all that blather said, i think those that can least afford could learn more by having purchases and checks declined than paying a $35 fee -what is the bank's real cost- and you should be able to opt out or have purchases BELOW a certain threshold declined -so your bank's "mortgage example" would be valid-

But "overdraft" that's not attached to another account? That's crazy. Or overdrafting beyond all the money in available accounts? Also crazy.

@Hoss: Very good point. Perhaps an overdraft fee should be based on the amount overdrafted. Say you pay a fee equal to 10-15% of the amount for the short term "loan".

I like my banks way of doing overdraft, its opt-in so they don't just automatically add it your account. Also instead of being some crazy fee like $30 each time you go over its only $5.

Then again they do charge me $1 to see the teller but they do give me unlimited debit card uses so I guess it all works out.

There's the same risk in 20 overdrafts for $5 each as there is for one $100 overdraft. So why twenty fees in the first instance?

I wouldn't have such a problem with these fees if there were say.. a daily limit to them. When a bunch of little transactions go through at once and you get dinged 35 dollars for each one.. that adds up fast.

I like the idea of the intrest only based fee the Electric Orange checking accounts have. That's the account I would get if I ever got a job that offered direct deposit.