Posts Tagged ‘Overdraft Fees’

New Scrutiny of Overdraft Fees

Monday, November 30th, 2009
It Adds Up

It Adds Up

Overdraft fees on checking accounts are lucrative, generating $30 billion in annual earnings for U.S. banks (which comes to $100 per banking customer) and £2.6 billion (or $4.3 billion total, $70 per customer) in the UK.  As such fees constitute easy money, the banks may not be assessing such fees in a transparent manner. Consumers often report that when three charges hit their account, for example, two smaller ones that would not overdraw on the account, and a larger one that would, the larger one hits the account first, irrespective of the timing of the charges, such that three separate fees can be assessed for the three items, rather than one (clearing the two smaller items first on a positive balance and then causing a negative account balance with the third, largest charge). The Federal Reserve Bank’s new regulations allow for consumers choice in paying overdraft fees. Consumer protection authorities in the U.K. determined that the banks’ overdraft fees were randomly assessed, bearing no relation to the actual costs incurred by the bank in covering the negative balances. As banking fees can add up, it makes sense for you to comparison shop for your small business and scrutinize such fees carefully. Sometimes a polite complaint to the branch manager who values your business is all it takes to get a charge reversed.