New Law on Bank Overdraft Fees & The “Courtesy” Overdraft Protection

New law on bank overdraft fees - the courtesy overdraft protectionA few years back, I used to work in a small bank and I remember a customer who owned a lawn-care company who seemed to be in there everyday.

He was bad with a checkbook at best. He bounced checks left and right and I still remember my boss bragging about how much money he had made off that guy.

Over a thousand dollars in a year – all in overdraft fees.Β Something just didn’t seem right.

Clearly the customer needed to get a little bit more organized with his finances, but it seemed like the bank should have taken a different approach…

New Federal Regulation on Bank Overdraft Fees

Recently Consumer Reports released an article discussing the new Federal law pertaining to banks and their overdraft services. Not sure if the motivation for the new regulation was customers like the one above, but I think it is probably a good thing.

Believe it or not, that $35 fee that the bank charges you when you overdraw your account is actually a “service” that your bank is offering you. They care so much about your well being that they want you to be able to buy that Snickers bar without being told that you don’t have the money in your account. πŸ˜‰ Β And then they charge you $35 when you spend 50 cents more than you have in your account.

Starting this summer (July 1st for new cards and August 15th for existing accounts) customers will have to opt-in to get overdraft protection on their account. So rather than getting charged $35 for that Snickers bar, your card will be declined. Some people will still prefer not to have their card declined, but you can bet that people are going to save a lot of money (and banks will lose a lot of money) without the automatic opt-in that many banks currently have.

How to cut your Overdraft fees now

If you don’t want to wait around until the Federal regulations kick in, you can try to see if your bank will allow you to opt out now. Some will allow it.

But even if they don’t check to see if they have an overdraft program that pulls from a savings account instead. For my offline checking account, our checking is linked to our savings. So if we do go over, it automatically moves money from our savings. It isn’t free – they charge $2 each time, but that sure beats the $35 overdraft fee.

An even better way to minimize Debit-Card Overdraft fees

We use ING Direct as our primary checking and savings account (and budgeting system) and one of the reasons I love ING so much is that they don’t have overdraft fees on their checking account. You can go below zero and they charge you interest (just like a temporary loan) on any balance below $0. So if we happen to go below zero for a day or two and then transfer the money over it costs us about 20 cents – as opposed to $2 or even $35. Not a bad deal at all…

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  1. [email protected]

    In general, this looks like a good piece of legislation. While it may be tempting to keep the overdraft priviledge just in case, what we really need to be worried about is the rapid fire, multiple OD fees on every charge near the one that puts you in over draft status.

  2. bondChristian

    I’m with Kevin here. The overdraft fee of $35 is one thing, but often that messes up so much more than a simple $35. Going over a couple bucks can easier turn into a couple hundred bucks and utilities being turned off (because of automatic withdrawal issues) if you’re not careful.

    -Marshall Jones Jr.

  3. Randy

    Kevin and Marshall echo my idea about multiple fees. I’ve seen family members attacked by this and it hurts big time. One solution is to know how much is in your account and not spend more than that. My bank offers alerts to your email or cellphone telling you when the balance drops below a preset level. You can wake up every morning to a text message with your balance.

    See my blog about this same thing –

  4. Gholmes

    Great post Bob. That is why banks have to be regulated. What they call a “curtesy fee” is really them being a loan shark. Especially when the game the system by clearing the largest debit first.

  5. Sandra

    Don’t rely on text messages or even your account’s web page. For U.S. Bank, these lag behind the event (be it deposit or debit) by as much as 5 days. And even if the bank sends a text saying a deposit has been applied to the account, they have been known to actually put a hold on that very deposit. They have even put a 2-day hold on a $30 *cash* deposit. This really hurts the younger bank customers (such as college students) who understand technology to the point where any delay in their banking information just doesn’t make sense to them. Sorry Randy — it is not so easy to really know what you have in your account.

  6. Randy

    Sandra, you’re right, college students don’t understand that at all. They expect it all to be instant. Fortunately, a lot of these college students don’t do a lot of “traditional” banking, so they aren’t impacted by things like checks and deposits.

    At least at my bank, I can tell when a deposit is held. The alerts are not a substitute for some good old fashioned money management, but it’s close. And if it’s all you’ve got, it’s all you’ve got.

    Of course, there is a good alternative – cash…

  7. Kristin

    Oooh. I hate that! We thought “overdraft protection” on our checking account was such a great idea. Our bank automatically loans us money deposited into our account. And the loan amounts seem to be picked out of thin air. Two dollars overdrawn and the bank deposits $70 into our account, and then turns around and charges %20 interest on that $70. That was the original scheme. Then we were sent a letter telling us that not only would this still be the practice, but that there would be also be a $12 fee every time that the bank “had” to loan us money. Rawr.

    Lord knows how much money they’ve made on us these last 9 years, but we’re older and wiser now and I will be sending a fax in on Monday to have the service completely and permanently removed from our account.

  8. Sandra

    I’m reading your article pretty late, I know. But still, this is awesome info and I’m on the same page with you 100% about ING direct. I work for a bank but I don’t use their services. It’s funny how with ING you never meet a banker since it’s all online, but they’re really treating their customers like human beings. A lot of these banks are just sucking their customers dry and putting them into vicious cycles of fees that are nearly impossible to crawl out of. Keep up the fantastic work and I’ll be sure to follow your tweets. =)

  9. BillO

    It’s simple really. The banks business model is to provide “free” checking, bill pay, etc., and at the first opportunity crush you with outrageous fees. This is really a poor way to treat your customer, in any business. I am not against banks making money — let’s just play by a reasonable set of rules.

  10. MARK

    Stay away from ing direct at all cost. they are a bunch of paranoid nuts-just like wells fargo. If you link one two many accounts they drop you like a hot potato insinuating you are up to some money laundering scheme. The typical transfer I make is say 40, 60 or maybe 100 bucks at the most. Bunch of crazy nutjobs.

  11. Brandon

    Hey I wonder how these new laws are going to affect past debts. I got a letter today indicating that I owe 1000 and is going to collections———> ALL RELATED TO THAT ” sinkers” bar referenced in the article. I am not going to pay this, what do I do now? I am in the process of disputing it, however if they verify this debt, what next hire an attorney?

  12. Ryan

    I just had something similar to happen. With a credit union of all places. I just had a $17 balance. Had a $9 charge and a $10 charge coming through the next day. But noooooo, the $9 charge was put ON HOLD but did not really go through which reduced my invisible actual balance. Afterwards the $10 charge put my invisible balance into the negative so I got the $29 fee, then the $9 charge actually tried to go through and another $29 fee was added, and then it was attempted again for another $29 fee. I deserved the one $29 fee in my opinion but $90 IN FEES FOR BEING OVER $2.00? I told the lady that they just hustled and robbed me and I’m paying it off and closing my account to go elsewhere.

  13. Mike Andrew

    My bank ( GuarantyBank ) sent me an “offer” today to sign up for “Courtesy Overdraft Service”. This is because: “If you do not enroll, we will not authorize and pay overdrafts on ATM and everyday debit card transactions after August 15, 2010.” Obviously this is a legal way for the banks to skirt the new law. Interestingly they also say: “We pay overdrafts ( with the offered service ) at our discression, which means we do not guarantee that we will always authorize and pay any type of transaction.” Luckily for the consumer, this is a “free safety net service”. So they actually guarantee no service for the following fees: $37 each overdraft ( insuficient funds ), $25 each overdraft ( unavailable funds ), and $37 more each 8 business days carrying an overdraft. I assume a carried overdraft fee is a offence worthy of another fine. To add insult to injury, the total amount of the fines are “unlimited”. I don’t think I’ll sign up…

  14. BeingBrokeSucks

    To date…from Feb of this year… UMB Bank has charged me $2,448.00 in bank fees.

  15. David

    My bank (Wells Fargo) will wait and start processing the larger transaction fees first, so that they can charge me multiple fees from smaller transactions on top of a larger one that puts me over, instead of doing them in the actual order of the purchases. They’ve told me this is how they do it . And they do it to protect me from getting bad credit.

    If they really had my best interest at heart they would have let the smaller transactions that don’t put me over and then the larger one. That way I don’t have 3-4 overdraft fees.


    Well RBC just charges me on a 2 dollar hold! I used my card and I knew that there wasnt any money in the account. I told the lady oh, sorry dont use that card. It was my mistake. she said it has already gone threw. I was like it should, I dont have any money in that account. So I stopped by my bank and added 2 into my account, in cash. so it should have gone threw to my account right away. but because they but a hold on my account for the 2 dollars they charge me 30 for the NSF(hold) then 6 for paying it. so the 2 dollars that I put in just brought my negative to still negative. Then when the real charge came threw they again charged me 30 for the NSF and 6 for paying it There has to be something I can do about this. Somewhere or someone I can report them to…….? DO NOT USE RBC BANKS!!!!!!!

  17. Sandy

    USAA is the same way. I paid my electric bill the same day my deposit went in. But sneaky as they are they do the deposits after the charges. When I pay my bills to the electric co they charge me a 1.50 fee, but bill it seperatly. So when there was no money there to pay it, oh look a 29 dol fee, oh look another 29 dol fee for the 1.50 fee from the elec co. Oh but the real kicker is they didn’t pay the elec. bill or the fee. They charged me a return fee. Banks suck!!!

  18. Shari

    I bank with National City and they have to be the worst where overdraft fees are concerned. I receive S.S. Disability and have it direct deposited into my checking account the 3rd of each month. Last month I was getting low pretty early in the month so I paid super close attention to my account on line. Well one night my son wanted to get something from Taco Bell and I let him as long as he didn’t go over $5.00. So he spent $3.21. For about a week things were okay in my account. Then one day I checked it online and all of a sudden I have FIVE $36 overdraft fees! I couldn’t believe it! I had been monitoring my account so closely. When I looked it over to see what could have caused it, it looked like the OD fee itself caused it!? Then from there I had four more, all of them under $10.

    But wait, there’s more! If your balance stays negative for 3 consecutive days, they charge you $8 a day until your balance is positive again! Remember I told you I receive a S.S. Disability check the 3rd of each month? By the time June 3rd came around my balance was -$263.04!! I needed that like I need one more MS symptom! To make me sound even more pathetic, my son just turned 18 so I no longer receive S.S. benefits for him…that was about an $800 a month cut in my finances (I’m a single mom with no other sourrce of income), so that really hurt. Not only is he a boy (so he likes to eat…a lot), he’s a 6′ 8″, 300 lb jobless boy!!

    What really bugs me is they know I get a check directly deposited every month, and have for the last six years! I guess maybe they needed my little bit of money because they didn’t get enough from PNC buying them. I really hate banks.

  19. Mark

    Like many here, I’ve also been hit really hard with these overdrafts. Wells Fargo for me. I had them disable my overdraft coverage so when this law hits, if my wife or I do something dumb like by a pack of gum for 1.00, it won’t turn into a cascading nightmare of fees apon fees, I’ll just get denied at the register which is fine by me. That gum wasn’t worth it. I know all banks are pretty bad lately about this, but I’m closing my wells fargo account after 20 years of being a loyal company. Banks don’t think their customers will change banks because it is a bigger pain than getting new car insurance. Prove them wrong, don’t let your bank give you the shaft. For me, I’m just going to pull out cash and treat my debit card as dangerously as a credit card is. It’s sad that after 20 years they will bounce 1.00 after all the thousands I’ve made them. No more.

  20. AJackson

    Well it’s reassuring to see that I’m not alone. When these stupid banks charged me all these crazy fees and sent me letter saying, “HELLO, GIMMIE $34 FOR OVERDRAFT, PLUS $15 FOR EXTENDED OVERDRAFT”, I’m stuck drop jaw looking like what the hell (pardon the language). Thankfully they wont be able to do that soon. After reading your stories, I’m glad to know that I’M NOT ALONE. Now all the government needs to do is find a way to make them give the money back. Thats probably part of the reason for the country having a recession anyway. I’m a college student who supports a family and has more people depending on me than I have to depend on. Therefore, my money is very valuable to me. If I had to send a letter to Chase, it would simply read, “PUT A CORK IN IT AND GIVE ME MY MONEY BACK! I’M TOO YOUNG TO DEAL WITH COLLECTION AGENCIES BEHIND YOUR OVERDRAFT THAT YOU SECRETLY CHARGED TO MY CREDIT CARD!!!!”

    But that would be way too perfect; so long to my 738 credit score……

  21. AJackson

    by the way Mark, I like the idea of pulling the bank accounts…I think I’ll find a good credit union

  22. Giovanni P

    I just found out about this law today. THE HARD WAY!
    For years, my credit union would take money out of my savings account, ($100.00 at a time) to cover unexpected overages. I knew that I was overdrawing my checking account the last 2 days. But I just assumed it was business as usual. However the costs associated with the 5 overdrafts I incurred exceeds the $37.52 in charges that I racked up with my debt card.
    When did we give the federal government the right to take money out of our pockets?! To force our credit unions, (which I always thought were different from banks) to take our money even though We have the money to cover our debts?!!
    Everybody is a thief nowadays! This is B.S!!

  23. Mark

    Giovanni, I’m not sure if you understand what this law does or if I read your reply incorrectly.

    This law is designed to protect people that overdraw, it does not hurt them. In any case, this law won’t cost you more than you’re already paying and for many people, it will save them a lot of cash every year. Maybe I read your reply incorrectly…. This law doesn’t give the Feds rights to take money, it restricts the rights of banks from taking your money so easily! This is a good thing πŸ™‚ Sorry if I misread your post but this law will save you money. It hasn’t been enacted yet by the way πŸ™‚

  24. Sarah

    Dont get too excited, i turned to a credit union instead of a bank. I have now found that although the fee for over drawing is less, they seem to do this preemptive fee’ing. Meaning that if your available balance goes in the red they start fee’ing you. Even if the transactions clear the bottom line , they still have already fee’d you for going over the available. I had two things pending invisably for a couple of days i forgot about. I got hit for one, but it cleared, then got hit for the second that didnt clear. When i asked why they said because my available was in the red it started fee’ing me. If it wasnt such a hassle to change banks i would have right there.

  25. Me

    This is NOT a good piece of legislation. As me and my husband found out when we called our bank Flagstar to inquire about it it was really a waste of time and money to pursue. At Flastar at least the only diff between having overdraft protection and not having it is whether or not they pay the transaction. You get the fee NO MATTER WHAT. They said its because they consider the transaction a bounced check. I forgot to ask but also-will they let you know right away that you account is overdrawn and decline it at the site and charge you(they previously said as late as last year they didn’t have this technology *eye roll*) or are they going to let you go about thinking that the purchase DID go through and charge you? And then would you end up incurring another “bounced check” fee from the merchant. Sounds like a cluster waiting to happen. . .

  26. Tracy

    @Sarah ~ BOA just started doing that recently also. I have two accounts with them and frequently go online and transfer money between to the two to cover transactions. If they would have taken the money out in order of posting instead of mixing the “in process” ones with the “posted” transactions then I would have only had one fee versus three. Then…. the idiot csr actually tried to talk me into the overdraft protection program. I was like lady… R U NUTS?!?! She says, well I cannot do anything right now about the fees because they are still in processing so you will have to call back tomorrow. So my reply was “oh… so you can TAKE my money that is in processing but you cannot do anything with YOUR fees that are in processing?!?! How convenient!!!”

  27. Mark

    @me –
    I’d switch to another bank.

    “They said its because they consider the transaction a bounced check.”

    While they might attempt to get around the new law with that kind of loophole, I think legally there is no transaction until the merchant has accepted your form of payment… ie. approved it. When people bounce checks it’s when they have already taken what they bought home… etc.. in this case there is no transaction. No money or goods have changed hands. Sounds like a class action lawsuit.

  28. Mike Schmidt

    people people. the answer here is quite simple. DON’T Spend what you DON’T have. Really. It’s THAT simple. I used to work in a call center for a bank, and the bottom line with 90% or greater of the people calling to request their overdraft fees back was simply “I’m sorry, that’s not a bank error, balance your checkbook.”

    Sure, we all make mistakes in our accounting, but c’mon 2400 bucks in OD fees, that is NOT the banks fault. That is yours, period.

    Banks aren’t around to manage your money, that’s not their job. charging you and overdraft fee is what they SHOULD be doing for abusing your PRIVLEDGE to have an account.

  29. Tracy

    @Mike ~ That’s what’s wrong with banks now….. they treat customer’s as if they are beneath the all mighty bank. So to play your game, even if it IS a privilege to have a checking account the bank STILL makes money off of my cash by loaning it to my neighbor and earning interest off that loan or investing it in securities. They basically give me my money (via check card, ect) from their reserves. I never spend money I don’t not have and am very good at managing my own money. The problem is that the bank and I think in different ways when it comes to the posting of transactions. THAT is what causes 99.9% of all the fees I have ever been charged!!

  30. kary

    I recently switched to a wonderful bank that only processes at 5 pm, so if i go over-as long as money is in by 5 pm I am ok.
    That said, I was working on closing my old amcore (harris) bank accoutn and I over drafted by 2.00. I had no idea and didnt get a letter until 7 days later. This was a Saturday. I went online and saw they went ahead and charged me fees for fri, sat AND sun for being over more than 5 days. I got a deposit in (cash) on sat, and it posted sat. However, they refuse to refund the fees that they “advance” charged me on Friday. So, even thoughthe account was + on Saturday, I paid fees through Monday πŸ™

  31. trace fladseth

    Are you aware that you say “opt in” then say “opt out” in the first paragraph?

    ie. “Starting this summer (July 1st for new cards and August 15th for existing accounts) customers will have to opt-in to get overdraft protection on their account. ”

    then: “If you don’t want to wait around until the Federal regulations kick in, you can try to see if your bank will allow you to opt out now. Some will allow it.”.

    Which one is it? Do I opt-in or opt-out of the new program? I want my card declined like it should have been all along if there is not funds. It is about time this TOTALLY UNETHICAL practice stops! I got charged $500 in one DAY, long story… But WAMU removed all of the fees over and over. I miss WAMU, Chase is no good. Now I see why they are thriving.

  32. PNC Sucks!!!

    Like David (David May 27, 2010 ) I’ve been a victim of “Creative Banking” . PNC was hitting me every month with OD fees for various reasons they could come up with. It has always been my experience that as long as the funds were in the account when the charge came thru that the transaction would clear. PNC charged me six $36 OD fees and their reason was that on Thursday I swiped the card for gas and the funds weren’t there even though my bi-weekly direct deposit came in the next day on Friday and the funds were in the account Monday when the transaction cleared. I was told that even though the money was there when the transaction came thru, it wasnt when i swiped it. WTF??? Apparently it was a new banking rule that no one could provide to me in writing of the change. Meanwhile this $36 fee caused a domino effect and by the time the dust settled I had six OD fees!!! Then PNC hit me with four OD fees when I had a “pending” charge of $353 for a gas bill that showed up pending on Monday after smaller charges were made over the weekend that should have cleared first. It was clear to me that the $353 was not going to clear the bank so while this transaction was still pending, I ran to the bank before 10am to deposit the money so that everything would clear. Two days later I have 4 OD charges. The $353 came out the account 1st instead of how it came in (last). Keep in mind I was told that the funds had to be in the account when the transaction was made but I was not charged $36 for the $353, instead I was charged 4 OD fees for the smaller charges that didn’t clear because the $353 was paid first and caused the other transactions not to clear and after each of these transactions, followed the $36 fee causing the next transaction to not clear and so on and so on… Granted I earned the $36 OD fee for the $353 charge. PNC twists & bend and pick & choose when to apply their “Creative Banking” to their benefit. I guess a mere $36 profit wasn’t enough for PNC compared to a $144 profit and they went for the gusto!!!

    I was much happier with Chevy Chase Bank for over 12 years before CapitalOne took over it with their own form of “Creative Banking” and I closed that account and ended up with PNC which turned out to be a case of “Out of the frying pan and into the fire”!!!

  33. Tracy

    FYI for everyone who is reading about this law…… basically it means diddly squat!! I know for a fact that both BOA and Chase (JP Morgan/WAMU) are “getting around” the legislation. Not sure why they passed it to begin with, it really probably only helps you with actual credit cards. According to BOA and Chase the only difference is that if you ‘opt out’ the transaction will not be paid and you will get the fee charged anyway (as ME stated a few posts up about Flagstar). The way they are getting around it is they won’t call it an ‘overdraft fee’ it will be called a ‘returned item’ fee. Once again… a USELESS piece of legislation!! I guess I would rather my transaction be paid if I will be charged a $35 fee no matter what. Cause if it gets returned, I will have the returned item fee along with a ‘fee’ from the merchant. The banks will ALWAYS be in control…. and that is what they just proved to everyone!!

  34. Jeanette

    ok so no i dont believe it is the persons fault….really is it my fault that i am in south korea with my husband. the fact that the time difference is way off than usa. umm no. ok so i made some transactions 3 days ago. 3!! also i paid the cellphone bill(last phone bill) today(mon-us, tues-southkorea). i transferred money before i paid my bill. well when i paid it, it said i paid it monday, technically true considering its us time but my transferred wasnt made until tues(skorea time). also for me the other transactions havent gone thru so it makes it seem like i did 7 NSF purchases which i did have money. i freaked out!! then called BofA. they informed me that yes it “Looks” like i didnt have money but my situation wouldve bought me an excuse out of OD fees. the rep told me that i would not be charged since the bank did “allow” those trans to go thru. But also because it wasnt a trans for gas….whatever that means. alot of times the time the trans are made makes a difference. they dont always automatically go thru. blame the bank or the merchant but because the payor has been checkin the online banking is not our fault.

  35. JFinFH

    So, here’s a question…

    My fiancee mistakenly opted in for overdraft protection. On Friday, she had 3 overdrafts ($25 each) that went through before her paycheck (direct deposit) showed up in the account, so she had the money in before the end of the day.

    Should the credit union reverse those fees? My bank reverses fees when money is deposited the same day.

  36. mark

    Nothing to lose by trying. This law has saved me about 100 bucks for what its worth πŸ™‚

  37. John

    Wow! I own my own lawncare business and I am being bamboozled left and right by these overdraft fees. The thing is if you have a business account you can’t opt out using overdraft protection and no one at TCF Bank seems to care. Additionally their online banking service is innaccurate and they keep saying how they are in the process of fixing it and until then fees are fees. THESE BANKS ARE SCANDALOUS! rob from the poor so that they can be rich!

  38. Matt

    How about when they dont pay the check and return it and still charge you the $35 ? I would like to hear comments on that practice. I bank with Wells Fargo and am about to change that.

  39. Amy

    I am also the poor schmuck that is being ripped off due to “return item fees” AND “NSF insufficient funds”. My paycheck was direct deposited on Wednesday morning the day before thanksgiving. That night i made 3 purchases that all went through just fine. On Black friday I went shopping and spent quite a bit of money. at the last store we went to I went online on my cell and checked my online balance and saw all my charges pending and still a positive balance. I made a purchase of 23 and change and was still left with a positive balance. However, I forgot that my car payment was coming out the same day… when the car payment hit the bank, it put me in the red but since everything was still pending at the time, I was also hit with a 25.00 fee for EVERY purchase I made that day totalling $250 in fees. most are labeled as “service charge” and 3 of them are labeled as “nsf returned check charge” I went to the bank and spoke with the head teller and she said it was because the charges were pending and that when I made one purchase, the funds are “held” and my balance goes down so when the other item came through there wasnt enough in the account to cover it. I said so you mean to tell me the charge I made on Friday after business was being “held” and those funds were not available but a charge i made before business were NOT being “held” and she didnt have anything else to say but she was NOT refunding my charges. I went back the next day and spoke with the bank manager and her reason for the charges was that all my purchases on Friday were hit with fees because I was “spending money I didnt have in the bank” Yet my paycheck was direct deposited at 12.01 Wednesday morning AND I made purchases on Wednesday night that went through fine without a charge. I said this to her but she was obviously NOT understanding what I was says as 10 minutes later while we were still arguing she says so yeah, your paycheck goes in on Friday and i said AGAIN, no it goes in on Wednesdays like it has every wednesday since i opened my account 3 years ago. So now I am confused as I have had 2 different people give me 2 different reasons for why I have so many fees when the bottom line is if you bounce one thing while other items are pending they all get hit with fees which is WRONG!!! I have the print out directly from the bank and the transactions show on their statement EXACTLY how they go through the bank which is also EXACTLY how i made them. it shows them all being paid then hit on Saturday with fees. the funny thing is, when i look at my online activity, its NOT the same as what their system says. I have no problem paying fees when I have made an error but when refuse to pay for something I did NOT do. I was being charged fees on a positive balance, go figure… Coincidently, the day I spoke with the manager, I asked to speak with someone higher that her, i was informaed that I could not at that time due to the fact that as we were speaking, the papers were being signed to sell the bank and that as of tomorrow, it would no longer be called river bank but peoples united…

  40. Tracy

    @Matt~The banks can legally do that. If you “opted out” of overdraft protection, then what they have done is charged you a “returned item fee” which is not the same as an NSF charge. Basically, they are charging you the fee to return the item and not pay it. But if you opted in, they would pay it and then charge you for not having sufficient funds in your account. The ONLY transactions the bank cannot charge you NSF fees on are Debit card purchases and ATM withdrawals. They cannot charge you a returned item on those either because there is no way they cannot pay for the transactions. No matter what, the banks will ALWAYS win this dang battle. And fyi, it’s that way at ALL banks. I have an account with two different banks, but out of them all I prefer CHASE based solely on their customer service. Hope this helps you.

  41. RKLINK

    I can understand if overdrafting happens to people once in a great while, but do any of you even remember how to fill out a checkbook register or maybe use a software program where you enter every penny you have spent on a daily basis?

    Before there were debit cards and online banking, people actually kept track of what money they spent every time they wrote a check, and if people today would actually take the time to keep their “checkbook” in balance, this might not even have to be a discussion we’d have. Debit cards have become a great convenience, however, they have made people lazy about keeping track of where they spent what.

    Online banking is awesome, because you feel like you don’t have to write everything down, but there’s definitely some issues with that. Different banks have different “hold” times on pending transactions – so they release the hold and put it back in your account, then 2 days later it posts, and because you weren’t keeping track of what hadn’t posted yet, it overdraws your account. Pay at the pump purchases don’t always show up for the right amount instantly, and so you look at your online banking, and you see that it’s there with a hold so you think it’s been deducted from your balance already….but you didn’t notice that hold was on only $1, so when it updated to the $40 you spent on gas, you went negative!

    I do think that the fees could be less, but at the same time, there should be some incentive for you NOT to overdraw your account, and actually keep track of what you have. If you tend to have trouble with overdrafts a lot, then you should have linked savings & checking, or maybe a “buffer” amount that you keep in your checking (I keep good records, but even I still keep at least an extra $200 “just in case” in there), or find a system that does help you keep track a little better.

    By the way, if you live in MI, OH, IN, parts of PA, KY, WV…. Huntington Bank now offers one extra business day for their customers to make a deposit to avoid overdraft fees (they get automatically refunded if there’s a deposit to make the account positive on the day after it went negative.) So not ALL banks are just “out to get you” with their fees. We’ll see if any other banks follow this lead.

  42. Mark

    Pretty good points RKLink. I agree that personal accountability is important. I don’t think anyone is making the point that we don’t all have personal accountability and responsibility for keeping our accounts balanced (unlike the Federal government, though right??). The incentive to not overdraw is the embarassment encounterd at the check out line when your purchase is declined. As banks have made it easier for customers to overdraw, the consequenses for doing so have also increased, fees are higher and leveraged more frequently than ever before (more so before this new law). These fees are a major profit generating machine for the banks people are complaining about above. I believe in the free market and have taken my business to banks that do not royally shaft people for the occaisional mistake. Cascading overdraft fees that can wipe out a family food buget in 2 hours is crossing the line between what is fair and just, and what the banks could (until recently) get away with. This law doesn’t make it any less important for a consumer to balance their checkbook, it just removes to some degree what ammounts to a financial death penalty on families already struggling during these economic times. There are quite a few people running around out there that simply cannot have that extra 200 dollars sitting around as a buffer in their account, if they want to eat that is.

  43. Ben

    This Legislation is a step in the right direction, however I believe that the new laws fall far short. I am opted-out of overdraft protection. Now I had a check bounce and the bank still charged me the fee. This fee is now an Insufficient funds fee. and my check didnt get covered. Now I have a returned check fee. I asked and the bank said that the same thing will happen if I try to use my debit card without the funds there.

  44. Mary

    I am fed up with this process the same as everyone else. But let’s face it, there are times in a legitimate emergency where you might need that extra cash before your check posts the next day. So I hated to not “opt-in” the program, even though I have been burned before. But now it is out of control. I purchased three 99 cent apps from i-tunes on the 11th, when there was PLENTY of money in there to cover the charges. Two days later I made a large cash withdrawal which did put me in the red by a few dollars.

    Well..even though the bank showed the 3 charges coming out of my account balance, the bank charges actually did not post until AFTER the cash withdrawal. Therefore I got socked 35 dollars for EACH one of those 99 cent charges made at the same time. I-tunes charged them as individual charges.

    I have questioned my bank about this posting order before and I have been assured by multiple people at the bank that there are government regulations that REQUIRE them to debit the money from your account in a certain order. Regardless of the date the cash advance will ALWAYS come out first. Paper checks will always be last. When I call to complain…very nicely, not rudely…I am always treated horribly but since they are obviously making tons of money off of this whole process, I would think they would be nice to you. I thought about changing banks, but my elderly mother who has no checking account problems OR credit problems was turned down by a new bank to open a checking account. It was a huge hassle to get them to relook at her history to agree to give her an account.

  45. Mark

    The state of California sued, and won a case against Wells Fargo for the order that they post your transactions. They had to return a couple hundred million dollars to their customers as a result of their mafia tactics. The rest of the states apparently need to sue as well… for some reason only Californa Wells Fargo customers are now being treated a little more fairly.

  46. Dave

    Yea its really easy to say that people should just keep a ledger to ballance their accounts but the reality of it is that it is near impossible with the frequent use of bebit cards these days and it IS IMPOSSIBLE due to the hold issue. You have no idea what money is being held on your account at any given moment. There are currently NO laws or regulations reguarding holding of money when you make a debit purchase. If your local grocery store wanted to hold $1000.00 of your money when you used your debit card to buy a $2.00 loaf of bread, they certainly could. Many gas pumps hold a minimum od $50.00 when you use your card at the pump. A real life story: I used my card each morning to fill up a small gas can to use for work (about $10.00 a day). The total amount over two weeks should have been $100.00. Instead the vendor was holding $50.00 for each of those 10 transoaction. So, instead of the $100.00 that should be used out of my account there was $500.00 being held. Of course you can gess what happens when all those $3.00 coffe charges start coming in and all my money is being held (mind you just held, not actually used, but the bank doesnt distinguish when it comes to available ballance). CHACCCCHHHING for the bank. Its time to start racking up $30.00 overdraft charges. Its like a money making smorgasport. They love it. Heres a bit of truth for you. Are your ready for it!! The ONLY person that can keep your available ballance accurate at all times considering holds on your account is your BANK. But of course this would not be at all beneficial to them because they would loose out on Billions of dollars worth of overdraft charges. So, they continue to exploit these supposed inacuracies in the online systems and available balances to keep reeming the consumers of their hard earned money so they can continue to pay their executives rediculous million dollar sallaries and even bonuses when they come up with new and creative ways to steal from their customers. Whats amazing is they have the nerve to call this a SERVICE. Yea, a completely involuntary service that happens to make them billions. Its a disgusting, immoral, greedy, shameless business these days. I challenge anyone out there with the brain power and drive to dream up an alternative to the current greedy shameless banks. There are enough of us disgusted customeres out there to make you legitimetely rich while saving the average Amereican consumer Billions of hard earned dollars. This new law is eliminating much of the overdraft abuse but I just found out the new rule does nothing for my business account. The bank refuses, yes REFUSES to reject debit transactions to my business account when there is not available money. Instead because they are not legally bound when it comes to business accounts they continue to force me to take part in their non voluntary SERVICE of overdraft stealing. You would think they would honor a customers somple request to reject transactions instead, like they do for my personal account. But they wont, the word customer means nothing, its a much too profitable scam to give up. And coming round back to the beginning please dont preach about ballancing your account. Thats the same excuse the banks use. You tell me how a person can ballance an account that can have an undetermined amounts of holds, for an undetermined amount of money, for an undetermined amount of time at any given time for any given reason. If a person can figure that out please let me know. Dont be missled or ignorant it is certainly all about the CHACCHHHING!!!!

  47. RKlink

    I do understand your frustration with the “holds” and whatnot, but at the same time, if you have that much trouble with it, just pay for your gas with cash… or if you only have the card, choose pay inside where you pay after and they just charge your card with what you have actually pumped for gas. Your debit card is a convenience product, and you do not HAVE to use it for anything if you don’t like the way it works. To put it into perspective — is a few extra minutes of your time (getting cash first or going inside to pay) worth making sure you are not getting overdraft fees?? I do understand car rentals & hotel holds are also a culprit, but to be honest, I just use a regular credit card (and they will usually disclose how much they are holding so you will know).
    Of course this is only my opinion, and I guess I am one of the few left who is completely anal about balancing my checking account, and every day when I get home from shopping, I enter all my receipts into a register to keep track (I started keeping track of where I spent my cash allowance when I was 7 years old using a checkbook register…. I have always had this crazy need to know where every penny goes.)
    On another note, I am a “newlywed” learning how to manage a joint account better because it’s hard to keep track of what my husband spends…. he is not the “nerd” like I am about it. So we’ve managed to take care of this situation by having a credit card that we use, and I just pay it in full once a week, and I can monitor what we have and send money through bill pay from the proper account. (We have more than one bank, but there are benefits to each one at this point that we don’t have one “primary” quite yet.)

  48. Ken

    I know I shouldn’t spend money I don’t have. However I recently had an emergency that required me to overdraft my account with Keybank. At the time I thought it would be a good idea to enable basic overdraft protection to pay for what I needed. After over-drafting my account I paid most of it back from selling a couple things. What I did not expect is my PC to fail before I could disable overdraft protection on my account. Two charges came through while my PC was down that I would have not authorized, in fact one was from an echeck using Paypal I could not cancel. The echeck was returned twice hitting me with a $39 fee each time. I was also hit with $39 for the initial overdraft. I was also hit with $39 for another charge, I was whammied three times for $39 and two of the transactions I did not authorize as there was no way since my PC was down, I never approved of reoccurring charges to my account. I’ve also been hit with two or three re-occurring overdraft charges, $28 for every five days my account is negative. I now owe over $200 in fees because of this crap.

    There really needs to be tighter regulations to protect the consumer. I don’t use checks, however I linked my bank account with Paypal. I want the option to be able to completely disable overdraft protection, not just debit or atm transactions. I want to disable overdraft protection with my checking account number for transactions through Paypal or Autopay services and charges to be denies outright if I do not have sufficient funds.

    Another thing, if we overdraft our account, just charge us the one fee for each transaction and not a re-occurring fee for every X days our account remains negative. If no goods exchange hands we should not be charged a returned check fee.

    After over-drafting my account I was also sent a threatening letter by Keybank three days later threatening to restrict/close my account after thirty days. The letter stated that I should not use, withdraw or deposit money from/in my account and that I should seek another financial institution for my future banking needs despite depositing about $150 into my account after over-drafting.

    I’m going to try disputing the charges, if they refuse I will make a big stink. They better not close my account because I’ll fight it, they shouldn’t of paid if to begin with if I wasn’t allowed to over-draft and now they are threatening to close my account?

  49. Randy

    Ken, just read your account of the problems. Wow. Those are big charges. You can (probably should) fire KeyBank as your bank of choice and go with someone else – maybe a small town bank or credit union. Take a list of questions with you – what happens in a case like this. Take a look at your statements and understand your banking needs. Find a bank that meets them.

    You have the ultimate choice.

  50. Johnny

    I always knew the government was retarded, but when they passed this bill I knew the banks were going to get their lost overdraft fees somehow. We’ll I found out today, they renamed it to returned fees. Same cost, exact same way to get it.

    I wish some technology would come out so we can get rid of the thievery banks.

  51. Mark

    Unless you actually overdraw your account, I don’t get how they can charge you. The only benefit (and a good one) from this law for me has been knowing that if I don’t have the cash, they will decline the card. I don’t think most banks charge for a declined purchase, only an actual overdrawn account which thanks also to this law, they now need your consent to do that. At wellsfargo, it’s pretty funny… they have a link on the main page of their online banking site that says – Prevent your debit card from being declined!… clicking on that link takes you to a screen where the consumer can once again give them the option to overdraw you for 40 bucks a pop, or whatever it is now. They are recouping their fees by eliminating free checking, etc at most places.

  52. Mark

    Unfortunately, it’s unlikely that any ‘damages’ would be awarded because if this is their policy, you knowingly or otherwise signed something stating that you were ok with it… read the fine print, etc… In many cases, they can just send you an electronic notification that your terms are changing, and after x amount of days, the change becomes enforceable. More likely, they have always had this ‘policy’. In contract law, their are only a few easy outs. If your bank breaches the contract (unlikely because they own a few dozen lawers)… i.e. charges you for something that is not in your ‘agreement’, or does something that is legally unenforceable…. i.e. breaks the law, you could get your money back legally. However, that doesn’t appear to be the case here. Usually, in cases like this, your best and perhaps only options are to 1) Explain the problem to someone at the bank (tier 2 or higher) that has the authority to back out the fees, explain to them in detail why this happened and how you are using this experience to determine if you will remain their customer. IF they value you as a customer, they will do the right thing. Or 2) threaten to take your business elsewhere… and if they don’t do the right thing, you should. Legal advise is very tricky and expensive, and certainly not bullet proof. We would need to know if this ‘policy’ of theirs is in writing and binding… (enforceable) and if it is, there is unlikely to be any recourse from your side. It’s good that Amazon returned the money as this proves that there was an error involved, not your fault. You might also pursue this with Amazon first as their error is what resulted in this problem and they wouldn’t have returned your money if that wasn’t the case.. or at least it would appear that way based on your post. However, your bank, contractually, is under no obligation to back out the fees. It’s no different if a customer hands me a bad check, and I try to cash it. The bank will hit me, AND the person that wrote the check and this is legal. The bank wins, you and Amazon lose. Pehaps if you make a good case with amazon customer service, the issue can be settled between amazon and the bank directly. As with most things impacting both the consumer, and business world. If you are getting screwed, put your account somewhere else. Letting the community know which bank it is that is doing this to you, may help a lot of us steer away from doing business with them. Good luck. Also, if it was me, I’d take the ‘time is of the essence’ approach and if your bank won’t do you right by close of business today or tomorrow, make today the last day they can call you a customer. The size of your business will dictate how much they really care about you and unfortunately, because this is a business account, and you couldn’t cover 40 dollars, they probably are not going to view you as a customer they need to fight for. None the less, if you feel you are being taken advantage of, and it sounds like you are, stop the bleeding now, close the account and move it. If your business can’t cover 40 bucks, or even 4000 bucks, you are likely not going to get any real respect from a major financial institution, even when due.


  53. Laurel

    I found out the hard way today that my bank is not allowing the opt-out on overdraft protection if you have a business checking account. I looked at the rules on this and there is nothing there about a difference between personal and business checking accounts. So, for anyone out there who thinks they are opted out of this so called “protection”, and you have a business account, check it out to make sure you really do have this.

  54. Jen

    I am having an issue. I had put a hold on my Netflix account for the past 2 months and was to go for another 2 months. This morning, I check my bank account and Netflix took money out of my account for a monthly subscription! I called them and I asked why on earth would they take money out while my account was on hold and the lady said, “well, that shouldn’t have done, let me reverse your debit.” Then I asked, “well what about the overdraft I now have in my account because a bill that I had paid by Electronic check had went through about 20 minutes later. The bank WILL not reverse the fee and Netflix made it clear that they will not pay for it either. I believe Netflix was in the wrong and should pay it, but what is a person to do when they hardly have any money and can pay just small bills here and there. It is so frustrating!! Okay, vent over. πŸ™‚

  55. James

    I have just been given notice of suit by Wells Fargo about overdraft fees. I was on disability with my mother as representative payee. I moved and she was taking money out of my account after I had left the state. Wells Fargo attempted to collect the debt from me, but when I tried to call them, they said because I don’t actually own the account, they could not discuss the account with me nor provide me any information, nor could I close the account. So if Wells Fargo tells me they can’t even tell me how many pennies are in my account, how the hell do they blame me for the overdrafts?

    [email protected]

  56. james

    this was the new law in 2011, now they have one to where if you overdraft, they not only charge you 36.00 but also after 5 consecutive days being overdrawn, they charge 5.00 per day you are overdrawn, this isn’t right and it sucks, I just as soon keep my cash in a box or safe under the bed

  57. Larry

    My bank has charged me a $35.00 Consecutive OD fee. The fee is charged every seven days if the late fees are not paid. The bank charges a $35.00 for NSF returned fee. Or if they pay they charge a $35.00 PD item fee. These banks are a rip off. It is hard for people living on limited income and people trying to make ends meet. The consecutive OD fee law should be repealed. The banks should find another way to earn a profit..