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Overdraft fees continue to be big business for banks, and that’s despite a 2010 Federal Reserve rule preventing banks from automatically enrolling customers in overdraft programs. In 2012, banks pulled in $32 billion from these fees.
Of course, consumer money mismanagement contributes to all overdraft fees at some level, but banks aren’t necessarily looking to help you stay in the black either. =
Here are five =ways banks are trying to squeeze more money from their customers.
Let’s start by talking about that 2010 Federal Reserve rule for a minute. Before its implementation, banks could automatically enroll customers in overdraft protection. Now, they must get customers to opt in.
However, it appears some banks aren’t being entirely transparent about what customers are getting into when they sign up for overdraft protection. According to a 2012 survey by the Pew Charitable Trusts, more than half of those who had overdrawn accounts didn’t realize they had opted into a program that would result in fees.
Another sneaky tactic is reordering your transactions so the largest items go through first. A representative of the American Bankers Association was quoted in Forbes as saying some banks do this to make sure large, important transactions such as mortgage payments make it through the account. But it seems like a highly convenient way to also maximize overdraft fees.
In 2012, the Pew Charitable Trusts found that all 12 of the largest banks, in terms of deposit volume, either reordered transactions to run the largest first or reserved the right to do so. However, some banks, such as Citi, have since reversed course and are now processing transactions in order from smallest to largest.
Along the same lines, some banks may credit deposits after they process your payments. That may be true even if you have a deposit being made electronically, such as a payroll direct deposit.
The law requires banks to make direct deposits available the next business day after the business day it’s received, but there’s nothing to stop them from running all your pending transactions and check payments before crediting the deposit.
The Expedited Funds Availability Act allows banks to put holds on checks that could be as long as nine business days depending on whether your account is new, the size of the check and if you have a history of overdrafts.
That said, by law, banks typically must make $200 of a check available to you the next business day. However, that doesn’t apply if you make your deposit via an ATM.
Either way, that isn’t going to do you much good if you’re going to be short more than $200 the next day. For example, if you need to cover $500 for the mortgage payment scheduled to hit your account tomorrow, depositing your $1,000 paycheck today isn’t going to help you avoid an overdraft fee.
This is perhaps the most frustrating sneaky trick banks use.
Let’s assume your significant other uses the debit card and you realize that transaction is going to push your account negative once it posts. You gather up some cash and rush to the bank. Your deposit is available immediately, and you deftly sidestep that $35 overdraft fee. Or have you?
Before you start celebrating, know that some banks will charge overdraft fees based upon the available balance, not the actual balance. As a result, your actual balance may never go negative, and the bank could still charge you an overdraft fee because of that pending transaction.
Sneaky bank fees can make it hard to keep your account in the black, particularly if you are living paycheck to paycheck. But here are a couple of suggestions to help keep your overdraft fees in check.
This post originally appeared on Money Talks News.
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