Banking and Overdraft Rules
Banks provide us with a very useful service. In the very simplest terms, a bank offers us a safe place to keep and organize our money – and in some cases even let us earn interest on that money. Pretty good deal. But there is a catch, of course: bank fees.
Bank fees are one of the two main ways banks make money. (The other way is by lending out our money to others at a profit). So, it makes sense that banks should charge some fees in order for them to stay in business.
However, sometime during the past couple of decades, bank fees somehow went from being an extra income source for banks to becoming a primary income source. One of the biggest sources of fee-based income for banks is that of overdraft fees. In fact, banks bring in about $30 billion per in overdraft fees in the U.S. alone. That’s pretty big business.
As consumers, it is important that we keep ourselves educated about banking and overdraft rules so that we can avoid paying overdraft fees whenever possible.
Here are 5 points about banking and overdraft rules you should know:
1. Most banks have overdraft protection programs in place. These programs cover charges made to debit cards, credit cards and checks even when the account has a negative balance. They also allow the bank to charge an overdraft fee for this service.
2. The majority of banks with overdraft protection programs automatically enroll new customers in these programs upon new checking account sign-up – often without making it very clear to the new customer exactly how it works.
3. Customers who are enrolled in overdraft protection programs are usually not aware that their bank will approve debit charges made at a merchant even when the account has a negative balance. This can result in the customer paying $100 or more in a single day in overdraft fees.
4. For most banks, there is no limit to the number of overdraft charges you could pay in a single day.
5. A few banks now offer no-overdraft-fee checking, which means they will cover charges to negative-balance accounts – but will still not charge you an overdraft fee.
Keep these rules in mind in order to keep the bank fees you pay to a minimum.
