subject: Overdraft Fees Being Abused By Re-ordering Transactions [print this page] Overdraft fee costs have been on a continuous incline over the years and the increased revenue the banks are bringing in because of those charges is astounding. The figures are in the billions, and every dime of that money is coming from the consumer's accounts. Some of these people may have made an occasional error, while others who are struggling financially have paid repeated fees as they juggle their financial demands.
Average costs for overdraft fees are $34 each time. If you are unaware that your balance is low or overdrawn, you may have several of those fees attached to further spending. Many banks offer overdraft fee protection for a price and even then you may be limited to how many will be covered. Some banks offer the service and many account holders may think they have the protection without realizing that the opt-in option requires a signature.
Some banks are working to improve the banking experience for its customers by offering overdraft protection towards accounts that are linked to a savings or line of credit. This way, if you do use more than what is in your account your transaction will be supported by the supporting account.
Much to the dismay of consumers, there are reports showing that some banks are using abusive techniques to collect more overdraft fees unfairly. Reordering transactions is the system which can turn one charge in to multiple charges within the same day. Some people may make multiple transactions each day. It would be typical of banks to subtract the amounts in the order in which they come. The practice or reordering the transactions to make the highest amount subtracted first and the lowest last has created extra fees unnecessarily. If you have a bank account with $100 in it and throughout the day you make transactions that go over your limit, one would hope the ones which are not funded would be rejected, but instead they create an overdraft charge. The charges could be from a $5 dollar breakfast, $20 lunch, $40 dollar co-pay at the doctor's office, and another $75 in groceries on the way home. In all practicality the last purchase would be subject to a fee. Reorder them from largest to smallest and the $75 grocery one gets though without a fee, the $40 co-pay would be an overdraft, the $20 lunch another overdraft fee, and the $5 breakfast got real pricey with a third overdraft fee for the day. The reordering of fees turned expensive for the customer and very profitable for the bank.
This reshuffling of transactions is just one of many abusive practices that have plagued the finance world in the last decade. Banks who are addressing these issues and making banking safer for consumers will hopefully have more followers in the near future. Consumers need to continue putting public pressure and continue lawsuits which will make more banks follow suit.
When opening a new bank account, you will want to seek clarification concerning the bank's policies in order to better understand what kinds of fees are charged and for what reasons.
