Overdrafts Make Up 60% of Checking Account Fees
Overdraft fees now account for 60% of the fees people pay for their checking accounts, according to a statement made by Richard Cordray, director of the Consumer Financial Protection Bureau. What used to be an occasional courtesy of the bank has now turned into a huge source of income for financial institutions.
Typically, your bank will offer three different options on handling a transaction when you don’t have enough money in your checking account. You can opt in to overdraft and pay a fee, overdraft for a smaller fee and pull money from another account, or have the charge declined.
While having the opportunity to overdraft may seem convenient, the fact is it will be costly. A study by the CFPB found that the average bank customer who used the overdraft option spent over $225 a year on fees.
If you have multiple transactions once your account is depleted, most banks will charge an overdraft fee for each transaction. Hence, if you overdraft four times and have a $30 overdraft fee, you could lose $120 in a single day.
Overdraft fees averaged $29 in 2012, and they’re only expected to increase.
In order to combat these costly fees, you may want to consider putting a stop on having the ability to overdraft your checking account. Then, the transactions will be denied. Yes, it is always nice to have the option to pull out emergency funds, but you have to consider if the fees are worth it.
Think that over the next time you go to write a check or make a debit card transaction that you can’t cover.