Overdraft Fees Cause Americans to Shell Out Over $29.5 Billion

There has been a great deal of negative information about the banking industry lately. From predatory lending to excessive bank fees, people have been growing more and more angry about the way that banks treat their customers. For decades, having a checking account was seen as a sign of maturity and financial stability. I can still remember being a little kid and going into the bank with my grandmother. She opened a passbook savings account for me, and each week I looked forward to taking a portion of my allowance and depositing it in the bank. Each time, the teller would write the new deposit and updated balance in my little passbook. Saving money was exciting and the people who worked at the bank were there to keep my money safe.



A lot has changed over the years and banking is just one of them. Recently, the Pew Charitable Trust did a study examining the hidden costs of having a checking account. According to their research, Americans spent $29.5 billion in overdraft fees in 2011. That's a whole heck of a lot. If you think about it, that's almost three times as much as people spent buying newspapers last year.



Much of the increase has been caused by the prevalence of debit cards and check cards. Being able to swipe a card at a store is super easy, but when you don't have enough money in the bank to cover the charges, it can get pricey. To make matters worse, many banks will still authorize the transaction, knowing that you don't have the funds. When asked about it, the bank will say that they do this as a "convenience" for their customers, however the resulting $35 overdraft fee is certainly not convenient.



Bank fees are typically something that most people don't pay attention to until they have them appear on their statement. According to the Pew Charitable Trusts, "Financial institutions do not summarize important policies and fee information in a uniform, concise, and easy-to-understand format that allows customers to compare account terms and conditions,"



It's important to note that many of the larger banks are considering raising their overdraft fees. This means that if you aren't familiar with your bank's policies, you should ask for a list of all applicable fees, so that you can make the best banking decisions for your financial situation.



For the most part, there isn't much that a consumer can do to minimize these fees, aside from keeping a large cushion in their accounts, which isn't possible for most of us. Although there has been a huge increase in the number of people who are using prepaid, reload able debit cards, even those cards have monthly service fees and high, per-transaction fees as well.



The best thing you can do to protect your finances is to get all of the information and compare costs. It's so easy to be overly optimistic and think that you'll never have to worry about overdraft fees because you don't intend on bouncing checks, but it can happen to the best of us and they add up quickly.



Are you familiar with your bank's fee schedule? Have you ever been burnt by high overdraft fees? Please share your experiences in the comments.