The Sound of Ideas®

The Battle Over Overdraft Fees

Tuesday, October 27, 2009
Topics: Economy, Politics
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Last year, consumers paid banks and credit unions nearly $37 billion in overdraft fees, at as much as $35 per transaction. Banks say consumers are to blame and the high fees are justified. Consumer groups counter that banks game the system to run up more fees. Tuesday morning at 9, join Plain Dealer consumer affairs columnist Sheryl Harris for coverage of the battle over overdrafts and the future of regulation.

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Guests

U.S. Senator Sherrod Brown (D-OH)
Jean Ann Fox Director of Financial Services, Consumer Federation of America
Mike Moebs, principal, Moebs Services
Gregory Neal consumer

Avoiding Overdraft Fees (Courtesy, The Plain Dealer)

Avoiding overdraft fees

● Use direct deposit for your paycheck. You get access to your money faster.

● Use cash for routine purchases. Not only will you lessen your risk of overdrafts, but you’ll also have a better sense of what you’re spending.

● Ask your bank if you can opt out of overdraft protection.

● Consider linking accounts so overdrafts are covered by your savings. But try not to use it, because it carries a fee, albeit a smaller one.

● Track your debit spending. Online, you won’t see debits that haven’t yet cleared. Jot down expenditures—don’t forget automatic payments—so you know what you really have.

● Keep a cushion in your account. Mentally subtract that from your balance.

● Go low. Your statement may give you an “actual” and “available” balance—figure the lower one is correct. (But don’t forget to subtract pending debits or checks.)

● Consider having several accounts, one for major bills, another for spending, so that your most important bills aren’t threatened by an overdraft caused by a frivolous purchase.

● Set up alerts. Some banks e-mail or text you if your balance drops below a certain amount.

● Appeal charges. You may be able to get some or all overdraft fees erased if you complain.

● Planning to break up with your bank because of overdraft fees? Open an account with a new bank or credit union first. Leaving an overdrawn account can make it harder to open an account at another institution later.

● Treated unfairly? Complain to the Federal Reserve at 1-888-851-1920. Tell your representative or senator at http://www.house.gov or http://www.senate.gov.

SOURCE: Consumer Federation of America; American Bankers Association

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