Banks are making a lot of money each year from overdraft fees.
A lot of money.
CNN Money is reporting on numbers recently released by the Consumer Financial Protection Bureau (CFPB) that show American consumers paid a whopping $15 billion in fees related to bounced checks and account overdrafts last year.
Addressing the numbers in a press call last week, CFPB Director Richard Cordray said, “Consumers living on the edge can find themselves racking up numerous overdraft charges. Despite recent regulatory and industry changes, consumers with low account balances and little margin for error continue to pay significant overdraft fees.”
Revealingly, while bank customers overdraw their accounts by an average of just $24, banks typically charge about $34 each time they do it.
Some point the finger at a confusing process associated with allowing consumers to opt-in to overdraft coverage. Many customers, they claim, have opted into overdraft coverage when they would likely be better off simply having a charge declined and then making other arrangements.
So what can you do to opt-out of these charges?
For starters, you can drop your overdraft protection. If you dump it, your one-time, in-person debit card transactions will be declined if there’s not enough money in your bank account to cover them. Be careful, though: Even if you opt out, banks can still cover – and charge you for having covered – checks, recurring debits, and online payments.
If you would prefer to split the difference between having, and entirely not having, overdraft protection, a good option is to link another account you have at your bank to your checking account. This way, should you happen to overdraw, money from the other account is transferred automatically to cover the debit balance. While there is still a fee incurred by doing this, it’s about a third the cost of a regular overdraft charge.
By Robert G. Yetman, Jr. Editor At Large