| The abusive bank overdraft is one of those hot-button | | | | protection measure, when in fact it is a profit-making |
| items that people will bring up with friends and | | | | measure for banks. |
| co-workers during casual conversation. You may | | | | Overdraft protection sounds like a real benefit, doesn't |
| frequently hear statements like, "I couldn't believe it - I | | | | it? After all, the word "protection" implies that it will help |
| checked my checking balance online on yesterday and | | | | consumers by protecting their money. Sounds good, |
| it showed three overdrafts - even though I was only | | | | right? Wrong. In most cases, people pay more in |
| overdrawn by $8." | | | | overall bank fees each year than they did before |
| Other people are afraid to bring up the issue for fear | | | | overdraft protection came along. |
| of coming across like an irresponsible consumer. After | | | | In the old days, before overdraft protection, if you |
| all, overdrafts only happen when the account owner is | | | | were to write a check for an amount that your bank |
| careless with his or her spending, right? Well, not | | | | balance could not cover, the check would bounce. |
| necessarily. | | | | While that did result in the payment of costly fees, it |
| It is true on the one hand that big banks do not have | | | | deterred most people from writing bad checks. The |
| the power to force someone to overdraw their | | | | result: the occasional overdraft fee. But, in the course |
| checking account. But, at the same time, banks engage | | | | of a year it didn't amount to much for most people. |
| in practices that increase the likelihood of an overdraft | | | | Enter overdraft protection plans, combined with the |
| - on purpose. | | | | advent of the debit card. These are the deadly |
| For example, many big banks have admitted to | | | | combination that makes overdraft protection so costly. |
| practicing something called transaction stacking, which | | | | You see, unlike with the writing of a bad check, |
| works by their processing first the larger outstanding | | | | charging your debit card for an amount that exceeds |
| transactions from a given day's spending. This | | | | your balance will still be honored by your bank. The |
| increases the likelihood of the need to pay overdraft | | | | result: overdraft fees, one after another. Many people |
| fees since any subsequent charges processed in the | | | | end up paying $50/month on average in overdraft |
| same day will result in one or more overdraft charges | | | | fees. |
| (provided that the account's balance has gone into the | | | | The alternative to all of this is finding a bank that offers |
| red). Transaction stacking is a sneaky way to | | | | free overdraft checking. This simply means that the |
| squeeze more money out of bank customers by | | | | bank will not charge you an overdraft fee, even if you |
| processing transactions in a way that favors the bank. | | | | overdraw your account multiple times in the same day, |
| And, banks do indeed profit nicely from overdraft fees | | | | week or month. |
| - to the tune of $30 billion per year. You see, all of this | | | | If you are looking for a free overdraft checking |
| came about when banks came up with something | | | | account, be sure that it:a. is FDIC-insuredb. offers online |
| called "overdraft protection." This ingenious | | | | access to bank statementsc. |
| money-making scheme poses as a consumer | | | | |