What is the smartest thing that you can do when it comes to saving money on fees with a bank account? It is very simple – Opt out of the overdraft protection service.
This is the “favor” that the bank does for you when you swipe that debit card or write a check for something with no money in the bank. By having overdraft protection, the debit swipe goes through and you get charged a big fat fee for saving you from the embarrassment. It gets better. You don’t know that you don’t have money in the account and continue to use the card throughout the day repeating the cycle of paying fees to the bank for the avoidance of embarrassment.
Banks are expected to make 38 billion dollars by this method. Think about it for a minute-that is almost 1.3 billion consumer mistakes generating roughly $30 a swipe. What purpose does having this feature serve? Well, if it is to buy time until the next paycheck, consider it a loan-shark type of loan. I can understand that because sometimes you have to do what you have to do. If it is to save you from embarrassment, well you might want to revisit that decision.
Congress passed legislation in 2010 forcing banks to stop automatically signing consumers up for overdraft protection. Now, you have to opt in for the service. As you can imagine the big banks have found ways to cleverly add that to your account without you really realizing the significance of the decision.
Toward the end of last year, I opened a bank account at one of the big banks near the house. By the time the fast talking branch manager got finished opting me into ‘this’ and opting me into ‘that’ I had a bank account and 2 savings accounts. I would have had overdraft protection if I wasn’t specifically watching for it. So, I can see how consumers are quickly signing up for it. Oh, I also had the opportunity to get one of their Visa cards on the spot.
If you sign onto the account, you get a message that says “Have a back-up-plan for your debit card purchase.” It is very cleverly marketed and again I can see how someone would sign up for it.
Pew Research Center conducted a study that shows the big banks deliberately processing debits and deposits in an order which causes the consumer to go into overdraft.
Recent statistics show that overdraft fees are on the rise again-even after this legislation requiring the consumer to “opt in” to the service became effective.
My warning: Be careful! Make sure that you don’t let the bank do you any expensive favors.
