While banks make $25 to $40 on every payment they run through your account after it's over drawn, you're left holding the bag -- at a time when you didn't have enough money to begin with. I have a huge problem with these hefty overdraft fees, since indeed it seems to only penalize the poor (or unorganized ; ). Meanwhile, I've looked at many bank annual reports, and it's safe to say that these banks are making a "boat load" off of the fees they charge when accounts are overdrawn.
There are, however, several lights at the end of this water-logged tunnel. Banks like Washington Mutual advertise that it will reverse one overdraft charge per year as part of its free checking account product. However, every bank I've used over the years will work with accountholders to either remove or cover more charges than that per year. Here are a few steps to take, the next time you're hit with an overdraft:
1) Call the toll-free number on the back of your banking account's debit card. Ask for a "one-time courtesy adjustment" on the fee.
2) Ask to speak with a personal banker at your local bank branch. It helps if you introduce yourself in person first, but some times just a call will get the process rolling. Most banking representatives (the ones in the desk areas) have the power to reverse overdraft charges on your account.
3) If the charge that overdrafted your account was incorrect, contact the merchant making the charge (their phone number is often listed next to the charge on your online banking statement). Tell the merchant that you'll be faxing over or emailing a sanitized version of your account statement (printed or cropped from a screen capture of your online statement) that shows the overdraft charges that were leveraged as a result. Insist that they immediately reverse the original charge and credit you an additional amount for the overdraft fees. If they do not compensate you fairly, you are within your rights to process a formal complaint for unauthorized account access, involving law enforcement, that your bank can help you initiate.
4) Some banks will automatically reverse the charge and fees, on a provisional basis until the issue is resolved, as soon as your formal complaint is processed.
5) Banks often set an internal limit for how many overdraft charges they will reverse. Once that limit is reached, if there is an unforeseen problem with your account that incurs overdraft charges, you must go to a manager or an even-higher-up to get the charge reversed.
6) Check the bank's most recent "Consumer Account Agreement." You can request a new one from any personal banker. If it was an unexpected large amount that went through, overdrafting several smaller charges, then check this booklet to see what the banks policy is for "Withdrawals from your account - Order of posting." If the booklet says that the bank can post items presented in any order it chooses, then request that its representatives choose to have the largest payment presented last -- thus avoiding overdraft fees on the smaller items.
7) Sign up for overdraft protection, either by attaching a bank-issued credit card or line of credit to the account. The fees drop to, say $10 versus $35, when an account is overdrawn -- even if the attached line of credit doesn't have enough to cover the transaction. Additionally, one bank's booklet tells me that "overdraft protection can also help you avoid having items returned due to holds placed on deposits to your checking account and can allow you access to your checking funds (up to the available balance in your linked account) while the hold is in place."
8) Sign up for your bank's e-mail notification of charges presented to your account, if your bank offers it. This is an invaluable tool for catching pending transactions before they hit your account with fees. If the money to cover the overage is deposited with a bank teller right after the bank opens the next morning, in many cases you'll at least not have to battle with overdraft fees cutting into your bottom line.
I hope these tips help! Let me know how it goes.... ; )
 |  |  | ||
| Jennifer D. Meacham, Gather Money Correspondent | ||||
Jennifer's column, "The Bottom Line," is published every week to the Gather Essentials: Money channel. Jennifer is a business and personal finance columnist who covers money matters for RedwoodAge.com and real estate news for RISMedia, and co-authored the best-selling retirement investing guide "IRA Wealth: Revolutionary IRA Strategies for Real Estate Investment" (Square One Publishers, New York). Keep up on the latest news and analysis into how you can take control of your business and personal financial future by joining Jennifer's "Self-Directed Investing 101" network. | ||||
 | ||||
Subscribe to Gather.com today to make a comment on this article.
rate
email
print
link to this page
Comments: 59
Thank you everyone for your comments. It's good to know that this information helps.
This one still cost me roughly a hundred dollars which I'm adding to the total for small claims court. I also intend to move my practice account. Thanks Ms. Meacham.
There's got to be a way to hook your checking up to at least a savings account for overdraft protection. Sounds like your last bank just didn't have the time for you. They've lost a great client!
Cybergwen, glad to hear you were able to get to the bottom of this with your bank's help. You might want to also investigate where the package was being shipped to in that order, and notify the police in that town. It could be one of the new cases where identity thieves are finding it easier to hack into individual shopping carts rather than steal credit card information.
Super feature article here!
This is great advice. We have overdraft privildges. Whatever that is! :(
It all boils down to the fact that if we use our debit card for a dollar bottle of soda and there is not a dollar in the account....... that soda will cost an additional $31.00
I hate banks
Personally, I'd rather have a charge declined (although it would be embarrassing) and know that I just have to pay another way rather than having a soda cost $31.
Your friend may have to do a little legwork on this, but there are Identity Theft and Bank Fraud statutes that that should help her. There's even the "Aggravated Identity Theft" statute passed by Congress in mid-2004 that declares that any person who "during and in relation to [bank, mail or wire fraud], knowingly transfers, possesses or uses – without lawful authority – a means of identification for another person" gets an automatic, minimum 2-year sentence on top of whatever else they get.
Additionally, the Truth in Lending Act may provide some protection; it restricts consumer liability for credit card fraud to $50 but I'm not sure if that extends to check fraud.
Meanwhile, back to her legwork: Where was the check cashed? That likely can be determined by viewing the back of the check. Does that place keep a video of its customers, archived back to the date of the fraud? Does it fingerprint individuals who cash a check there and who aren't bank account holders? If so, and there's a fingerprint or a video, that may be just what the police or DAs office needs to proceed.
In the meantime, if the check was cashed at the bank then I'd recommend that your friend contact the bank's district manager to explain the situation and see what can be done. From everyone I've talked to in the banking industry, it seems to me that the bank may be liable for failing to assure the identity of the person accessing your account.
If the person took more than $1,000 from the bank account, then the case would be handled by the state's Department of Justice. Smaller thefts are referred by the DOJ to respective state DA's office. Your friend also can notify the Federal Trade Commission to report the bank's violation of violating the Identity Theft Red Flags and Address Discrepancies under the Fair and Accurate Credit Transactions Act of 2003.
Hope this helps!!
Your Frugal Eats group will be spotlighted on the Tuesday Edition of Today On Gather.
Be polite and respectful and calmly explain the situation and what you hope to achieve. Also, if you want a late fee adjusted, ask to have the fee adjusted because some places can not do an adjustment unless you ask. If you just rant about the fee and do not ask you may not get anywhere.
Yes, I am a customer service rep who has worked for more than one large company :)
A few weeks into the deployment, Nic had to buy a few necessities and because of an unexpected amount of money taken out of his account (I can't remember exactly what happened), he became overdrawn and hit with 3 overdraft fees. He had no access to his account, and was in an area where it was impossible to communicate, so he did not know until a day or two later what had happened when I was finally able to tell him. (I'm a little OCD with managing our accounts)
Anyway, back to the story. I figured out what had happened the DAY that it became overdrawn, and I called the bank to try to explain the situation to them and tell them that I would get to the bank on my lunch break to deposit the funds to bring it back into the black. The DAY that he was overdrawn - before they even hit him with overdraft fees, and I called to explain. They couldn't see any overdraft fees (because they weren't added yet, it was too early), and said that it shouldn't be a problem, and to call back if it shows up in the next couple day.
It did, even after I had deposited enough to get him back in the black. I called back, and was told in no uncertain terms that they weren't going to do anything, and I would have to deal with the overdraft charges. I called back and talked to 3 others, and had the same feedback. The last person I talked to their supervisor, which I'm starting to think was just a 'friend' pretending to be a supervisor. I was very friendly on the phone, but was angry that I was being treated this way - especially when Nic was deployed to Afghanistan and the circumstances surrounding it.
I finally ended up paying the $100 in overdraft fees, and that's around the time I started hating Bank of America . . . BEFORE they screwed up my social security number, my last name, sent my checks and debit card to an address Nic had years ago and wasn't even supposed to be in the system after I had verified the CORRECT address. It was just one thing after another.
I still don't like them, but we put up with it because it would be too difficult to change accounts right now with all the direct payments that come out for the mortgage, truck payment, insurance, loan, etc.
Congrats on your Gather homepage feature under 'Money'!
Here's a 10 for you, Jennifer.
Michelle, what a drag! In the future, you may want to try going to a different branch of BofA to settle disputes or make deposits. I have one branch close to my home that gives its customer's attitude, puts 10 day holds on merchant deposits, and randomly decides not to cash or deposit checks. Reversing an overdraft fee would be a losing battle with them. Yet the other branch, a few miles away, is a dream to work with. Sometimes being "un-customer service like" is built into the culture of a specific branch rather than the whole institution.
Me too Joe T..
Excellent advice Karen R.. Someone with a problem "gets a lot more bees with honey than vinegar" for sure. It's okay to stick to your guns but it does little good
in this case to be mean about it.
I have some friends who put decrease the available funds amount in their checkbook by $500. This means they always have that much in the account for emergencies. Not the best way to handle it, in my view, but it really helps them not to have the money in front of them as available balance. When I took one to the bank because of an overdraft, the bank suggested this ... that friend has not had the problem again.
Meanwhile, thanks for the feedback George and Janet B.
Our bank rarely charges us overdraft fees.. which we hardly have them anymore now that we are organized and all.. anyways sometimes it happens and the waive it since it dont happen often.. Back when we were off all the time we had to pay a few times..
Thanks for your time and this info.
We are going to get a new account
However, I second your decision to go ahead and close your compromised account and open a new one. It's better to be safe, I think, than sorry.
Thanks again. I really do appreciate the fact that you took the time to email me and to comment with this information.
I didn't realize how predatory bank practices can be untill this year and really think some legaslation needs to be passed to get them under control. What they are doing with overdraft fees 'might' be legal but it is still morally bankrupt and akin to loan sharking imo. Earlier this year i made a cash deposit directly to a teller at Charter One on a early Thursday afternoon and it wasn't credited to my account for 2 days(I guess cash needs two days to clear now?!) resulting in a snowballing domino effect of overdraft and overdraft late fees that ate my direct deposit payroll check and left me broke. It took a full ten days for them to clear the over $850.00 bogus overdraft fees and the only thing that saved me was i kept my deposit slip, otherwise it was growing at such a exponential rate i don't know how i would have caught up with it. It was a very stressful ten days and when they cleared it they acted like they were doing ME a favor.
My current dilemna with Charter One is they charged me overdraft fees on unposted items and it shows nowhere on my online statement were and if I made a mistake. One thing that is really sneaky and I don't understand how it can be even legal is that they always post the items you charged for the day in descending order starting with the most expensive item to the least expensive. Which means if i charge five items in a day and overdraft only on the last one i will get charged five times instead of once. They Always list the most expenive charges first regardless if you charged it in the evening and charged the cheaper items in the morning. So, in this instance instead of getting one o.d. fee for 39.00 you get five totaling almost $200 even though you had the money in your account at the time you charged the first four purchases. This has happened to me several times and how it is legal is beyond me. I feel a little victimimised even though I let them do it to me my not being perfect in my ledger and not closing my account and switching to a credit union or using one of the other methods outlined in your excellent article. But it finally had it and will pay my bills with money orders if i have to as soon as I settle this latest funfest and close my account.
Do you or does anyone know if contacting the Better Business Bureau would help in a dispute with bank and overdraft fees?
Thank you very much, Jeff
The only problem i have had is that the bank will often hold cash when we make a deposit, sometimes for up to 3 days. We make a deposit, thinking we had the money. Instead the bank decided to hold the money, go to the store, buy something and viola overdraft. It shouldent be legal for them to do it but the manage to do it probably every other month. We start making it to where the ONLY money we put into our bank account is just enough to cover or rent, which is paid in check, everything else is done in cash. That way we avoid overdrafts.
Also using the credit part of your bank card can cause horrible overdrafts. Especially for us. Not fun at all.
Going to the BBB won't help in this case, since you likely signed a contract saying you read the rules when you opened your checking account. But, to be sure, read through your checking account agreement again. If the guide specifies that charges will be posted "in the order received," rather than at the bank's discretion, then the bank is violating its own contract. In that case, do indeed contact the BBB, Federal Trade Commission and banking regulators (here's a list of federal banking regulators from the Security & Exchange Commission). Then, you have ever right to hire a return and file a class action lawsuit to recoup the group's errantly-charged fees....
Quick correction to the last sentence in the post above: "Then, you have every right to hire an attorney and file a class action lawsuit to recoup whatever the judge may determine to be the group's errantly-charged fees."
Hi there!
Thanks for telling me about this article... so cool that this one has so many views.
Here's another view to add to it!
I had this problem with my bank a long time ago. I kept getting overdrafts even though the money was in there. It was a vicious circle. Now I have overdraft protection.
Excellent info Ms M. now that WAMU is now Chase they are even more accommodating
Interesting find Debra. Thank you for the update.