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Banks Work to Increase Customer Overdraft Fees









The Pew Charitable Trusts analyzed 44 of the 50 biggest U.S. banks and found nearly 40% order transactions in a way that leads to more overdrafts and more fees for consumers.

Pew found that 18 of the 44 banks process purchases, payment, and withdrawals in order from largest amount to the smallest. The result of processing the highest amount first is consumers account balances are reduced more quickly and can result in multiple overdraft fees.

Withdrawals and deposits are processed by most banks at closing each weekday. Checks and online bill payments can take multiple days to clear.

The order that banks process transactions can vary from bank to bank. The highest to lowest manner can result in addition fees for consumers who are not careful. If you have $800 in your checking and pay the $100 electric bill on Monday and then the $810.00 rent on Tuesday and they clear on the same day, the rent payment will be posted first. The result is your account goes negative and you are charged an overdraft fee. The electric bill results in a second overdraft fee.

If your bank processed in the order that the bills were paid or smallest to largest, you would only pay one overdraft fee.

According to Pew, the median overdraft fee is $35 among the big banks. Transaction reordering from high to low can really harm consumers on a tight budget. In the earlier example if you had also paid the $125 cable bill and $75 water bill, you would have incurred $140 ($35 x 4) in overdraft fees instead of a single fee of $35.

All the more reason to start the new year off right by making a budget and building your emergency savings account so you can avoid paying extra fees.

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Posted January 4, 2017