According to an article in the Daily Finance, the amount of profits banks are earning from overdraft fees has nearly doubled since 2000 reaching a record $38.5 billion. The average bank overdraft fee rose from $25 to $26 for the first time in over 40 years, causing some consumers more trouble than their high interest credit cards. And many consumer advocates say, that’s exactly the point of increased overdraft fees on consumer bank accounts. Many consumer advocates claim that because over the limit fees on credit cards are no longer legal without consumer permission beginning in February 2010, many banks want to make up the profit difference by targeting bank accounts with high overdraft fees.
The article said:
Some of the banks driving up their overdraft charges include:
**At Bank of America, a customer with an overdraft of just $6 can get a $35 penalty. If the customer doesn’t realize his or her mistake, he or she can be charged up to 10 overdrafts in a day, or $350. Banks usually clear the highest check first, so many small checks can be thrown into overdraft before a customer knows it, since multiple checks can clear on the same day.
**Chase has tiered overdraft fees. The first overdraft in a 12-month period is charged at $25. The second to fourth at $32 and the fifth is $35.
**SunTrust (STI) charges $36 from the first overdraft.
**Citizens Bank charges a $39 overdraft fee after three overdraft items.
If you’re not careful, overdraft fees could cause as many financial headaches as payday loans or high interest credit cards. And just like credit cards and payday loans, overdraft fees could put you on the fast track to bankruptcy.
Here are some strategies to avoid overdraft fees:
Linked Savings Account – This program allows the bank to access your savings account when you overdraft your checking account, often for a nominal fee.
Linked Line of Credit/Credit Card – This program allows the bank to cover overdrafts of your checking account with your line of credit, such as a credit card. You will need to secure this line of credit through your bank. This option usually has an annual fee; but is much cheaper than the bank’s overdraft loan program.
Reject Purchase – You can also request that your bank decline any purchase that causes you to overdraft your account. Beware the merchant may charge you a bounced check fee.