How to Avoid Abusive Overdraft Charges by Banks
How to Avoid Abusive Overdraft Charges by Banks
In a tough economy, we consumers are the only ones trying to make ends meet. Financial institutions are also out to find more money to fill their coffers wherever they can. For example, if you have had a credit card company send you a notice of a pending interest rate increase out of the blue within the past year, you have experienced this trend first-hand.
Banks are out to make more money, too, and they are finding ways to do so. One way is to continue to charge outrageous overdraft fees to their customers.
Now, granted, we banking customers sometimes make mistakes and allow our accounts to become overdrawn. And, it makes sense that banks would want to charge something for covering our overdrawn accounts so that our checks do not bounce and our debit transactions do not get returned. In that sense, some sort of fee or penalty seems fair.
The truth is, however, that the situation is not fair for the banking customer for three main reasons:
1. Banks have admitted to purposefully try to process multiple account transactions made on or around the same day in a way that causes the most-possible overdrafts to occur (and, of course, overdraft charges to be incurred by the customer). They do this, incidentally, by processing the larger transactions first - thus in many cases causing the account's funds to run dry, making way for the remaining transactions to cause a fee to be charged.
2. The fees banks charge for overdrafts are very high. For example, you could end up paying a $35 fee - even though you only went "into the red" by $3 for a cup of coffee.
3. The online reporting that banks use to inform customers of account status is often confusing, making it difficult to track the status of various items like outstanding checks that show as having been paid but that have not yet been deducted from the available balance - giving you a false sense of security about your balance.
The best way to feel good about overdraft fees is to avoid them altogether. If you want to know how to avoid abusive overdraft charges by banks, here are some pointers:
1. The most obvious way to avoid the fees is to never have another overdraft again, but that is unlikely, no matter how prudent a bank customer you are. There are just too many variables to track and too many things outside of our control.
2. Try maintaining a consistent "pad" in your account of $500 or more. This is not easy for most people to do, but if you have the wherewithal, this is a good policy. If not, read on!
3. Set up a savings account with your bank and connect it to your checking account (the one that is prone to overdrafts). Be careful: even when you have this set up, some banks will still charge a fee every time a transfer is made to avoid an overdraft (sneaky, eh?).
4. Of course, the best way to avoid overdraft charges altogether is to switch your checking account to another bank - one that does not charge overdraft fees, even when you overdraw your account. For more information, check out: http://www.escape-overdraft-fees.com/.
Avoiding overdraft fees altogether while still a customer of your current bank may be impossible. Still, it is worth trying to follow the above-mentioned steps to avoid these costly fees however you can. There is nothing like already having an overdrawn account and then adding insult to injury by having to pay the bank an additional sum to cover outstanding checks. You owe it to yourself to do what it takes to avoid this in the future.