Charged exorbitant overdraft fees by your Bank?
You may have been improperly charged an exorbitant overdraft fee on your transactions. If you have, you could report your bank.
After a long day at work, you’re probably in a hurry to get home to make dinner. You swing by the grocery store and stop the ATM machine by the door of the grocery store and you withdrew some cash. Or, maybe you were in such a hurry, you ran into the grocery store and just paid for your groceries using your debit card. You didn’t even think about it. It was just a small amount, anyway.
At the end of the month, though, you received your statement of account and to your shock, your bank charged you an overdraft fee. It turns out, when you made that ATM withdrawal at the grocery store, or when you swiped your debit card, you didn’t have enough funds in your account to cover that withdrawal or purchase. Your bank was “kind” enough to “save” you from having the ATM machine spit out your card (or worse, swallow your card). Your bank advanced you your grocery money and in exchange for that “kindness” your bank charged you an overdraft fee. The average overdraft fee is around $33.36.
What is an overdraft fee?
Banks charge overdraft fees when their depositors make withdrawals or issue checks while their accounts have insufficient funds. The bank advances the cash and makes the payment to the merchant. It saves the depositor from having their checks bounce or their debit cards declined while they are paying.
How would an overdraft fee be improper?
Overdraft fees can be improper when banks raise the fees without prior notice to the depositor. Studies by the Consumer Financial Protection Bureau show that banks gain 65% of their revenues from deposit accounts through overdraft and NSF (no-sufficient funds) fees. In 2019, further studies show that depositors paid an average of P225 in overdraft and NSF fees.
An overdraft fees charged at a flat rate by banks may also be improper. This means that it does not matter if you have overdrawn your account by $1 or $100 – the bank will charge you the same fee.
It may be improper when the bank charges a depositor many overdraft fees in a day. It may be improper, as well when banks automatically “opt-in” their depositors into overdraft coverage. The banks make it the opt-in a “default” in all accounts. An overdraft coverage is an agreement for the bank to make payments even when the depositor’s account has no sufficient funds.
How can you avoid this fee?
Track your balance.
This means making note of all checks you’ve issued and all withdrawals you’ve made. It also means noting down all the scheduled payments to make sure that you have sufficient funds for the scheduled payments.
Make a balance inquiry.
It is a good practice to check your account balance before making a debit card purchase or making a withdrawal through the ATM.
Link your checking account with a savings account.
If your overdraft fees are caused by issuing checks without sufficient funds in the account, you can link your savings account with your checking account. This can only be done if you have both, the savings and checking accounts, at the same bank. Once your savings and checking accounts are linked, then whenever your checking account has insufficient funds, your bank will transfer funds from your savings account to your checking account to cover the overdraft. Your bank will probably charge you a transfer fee but the transfer fee will be smaller than an overdraft fee.
Don’t opt-in to overdraft protection.
Check with your bank if your account is enrolled or “opted-in” to overdraft protection. If your accounts are not opted in, then this is probably better for you. Of course, when you make purchases and your account has insufficient funds, your credit or debit card may be declined. Studies have shown that depositors who have opted-in for overdraft protection are three times more likely to get more than 10 overdraft charges per year. Opted-in accounts may be charging as much as seven times the overdraft fees that’s charged on accounts which are not opted in. If you are opted-in for overdraft protection, then you can choose to opt-out.
Ask your bank for a line of credit or a credit card to cover the overdrafts.
Paying a credit card is a lot less stressful than the shock of seeing huge overdraft charges in each of your bank statements.
Shop around.
Go to your bank and ask about the overdraft fees they charge. Compare the overdraft charges with account fees at other banks. Bring your business to the bank that has smaller overdraft fees.
What should you do if your bank has charged you exorbitant overdraft fees?
Report your bank. You can report your bank to the Consumer Financial Protection Bureau. The CFPB is making studies on overdraft fees and they are the agency responsible for making rules regarding overdraft fees.
Speak to a lawyer. If you are wondering if you have a right not to pay the exorbitant overdraft fees then it is best to speak with a lawyer. If you feel that the overdraft fees have caused you financial suffering or if it hurt your credit score or credit standing, then you can speak with a lawyer to find out if you have a cause of action against your bank. Contact us today and speak with a qualified and competent lawyer who can help you.
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Banks often charge such improper fee under certain other scenarios as well. Also read our articles on Bank Charges & Hidden Foreign Transaction Fees.
