It has happened to many of us. We buy a $2 cup of coffee using our debit card. A few days later we learn that the cup of coffee cost us $37 because we accidentally overdrew our bank account and the bank charged an overdraft fee of $35.
Last month, the Pew Charitable Trust reported that in 2015, U.S. banks with assets exceeding $1 billion collected over $11 billion in overdraft fees and insufficient fund fees. These fees are a significant revenue source for major banks. Banks intentionally try to maximize these fees in order to add to their profit margins.
You can take action to avoid overdraft fees. In 2009, the Federal Reserve instituted a regulation where customers can opt out of overdraft services that can cost as much as $35 per overdraft. If you opened your bank account prior to 2009, or opted in for overdraft protection when you opened your account, you can contact your bank to opt out of the service. By doing this, your debit card transaction will be declined if you exceed your balance and you can avoid being charged with overdraft fees.
We hope you are finding our consumer alerts useful. And, as always, if you know someone who is struggling with overdue debts, please have them call us for a bankruptcy consultation at 212-315-3755.