I’ve always figured banks actually want you to overdraw your checking account so they can score a fee, but I had no idea banks manipulate transactions to cause overdrafts, as SmartMoney.com reports. Here are the two most shocking tricks banks use, and how you can fight back.
You might think that when you use your debit card, if there is not enough money in your checking account, the charge will be declined. Not necessarily. Banks will discreetly set a cushion on your debit card so that charges overdrawing your account by up to a certain amount will go through.
Fight back by asking your back to set the debit overdraw amount to zero. Next time you’ll just suffer an embarrassing decline rather than a fee of up to $39.
This is some slimy stuff. Let’s say you use your debit card for a few small purchases on one day:
- A $5 breakfast
- A $10 lunch
- A $25 trip to the drugstore
Then, your landlord cashes your $700 rent check later that day. Unfortunately, you only have $701 in your account. It seems that you should be responsible for one overdraft, right? You spent your account down to $661, and when the rent check cleared, your account gets overdrawn by $39.
Your bank, however, may actually rearrange the posting order of your transactions, however, so that the rent check clears first, and then your other transactions. That means that your account would get overdrawn by the rent check to ($39) and be assessed a fee (let’s say $25).
Your account is now at ($64). Next comes the $25 debit, triggering another fee, putting your account at ($114). At the end of the day, the bank will charge you $100 in fees and your account will be at ($179).
Fighting back is hard, but the best way to dodge this unscrupulous practice is to avoid an overdraft in the first place by tracking your spending and keeping a cushion of funds in your checking account at all times. If it does happen to you, however, call your bank immediately to protest. Threaten taking your account elsewhere if they don’t knock off all but one of the fees.