The Charges Add Up When You Do Not Fees can add up when a person uses a checking account that does not have enough money in it. USA Today reported that a study by the Federal Deposit Insurance Corp. (FDIC) found that these fees cost young and low-income people the most money. Many people use their checking accounts to write a check, get cash from an ATM machine, buy something with a debit card or check, or pay a bill automatically or electronically. Accounts become overdrawn when people do not have enough money in accounts at the time they make these transactions. Then fees start. A savings institution like a bank, savings and loan, or credit union can cover the money. This means the institution pays the money that is not in the account. An institution can charge people overdraft fees if it covers the money until you add enough money to your account. An institution can charge fees for a bounced-check or nonsufficient funds (NSF) when it returns a check that it did not cover. Also, the person or company who received the NSF check can charge a returned-check fee. The fees can add up fast. Each overdrawn check can cost $38 The Federal Reserve Board gave an example of how this works. A person forgets that he had only $15 in his account. He writes a check for $25, uses the ATM to get $40 in cash, and buys groceries for $30 with a debit card. These three transactions total $95. The account is overdrawn $80. The person’s bank covers (pays for) these transactions. However, it charges a fee of $25 for each. The total is $75. The person still owes his bank $80. He now must pay his bank $155. A FDIC study came out in November 2008. It found that a little over 25 percent of accounts had NSF transactions during the period of the study. More than 38 percent of people, who made at least one NSF transaction, had income of less than $30,000 a year. Adults between the ages of 18 and 25 made 46.4 percent of all NSF transactions. You can avoid the extra charges The Federal Reserve Board listed the following ways to avoid fees: Keep your checking account register up to date. Record all checks as you write them. Record any fees. Record your electronic withdrawals as you make them, like ATM withdrawals and fees, debit card purchases, and online payments. Remember to record automatic bill payments, like utilities, insurance and loan payments. Keep track of your account balance. Go over your account statements each month. You can verify what was paid and what your checking account balance is in between statements. Call your bank for a print out of your payments and deposits. Look at your account online. Get a print out at an automatic teller machine (ATM). Sometimes mistakes happen Your bank might remove the extra charges if you do not have a history of overdrawing on your account. Call your bank and ask to speak to customer service. Tell them what happened and ask if they will remove the charges. Savings institutions may have other ways to cover overdrafts. These may cost less than overdraft fees. Check with your bank. The following are some ways: Link your checking account to a savings account. The bank can move money from savings into checking. It may charge transfer fees. Set up an overdraft line of credit. Your bank then lends you money when you overdraw your account. You will pay interest on this loan and have an annual fee. Link your account to the bank’s credit card. Overdraft money becomes a cash advance on your credit card. You will probably pay a cash-advance fee. Interest charges will start right away. For more information, look at the Federal Reserve Board brochure at http://www.federalreserve.gov/pubs/bounce/#happen. Sources: Kathy Chu. “FDIC: Bank overdraft fees hit young, low-income customers.” USA Today. Dec. 3, 2008. The Federal Reserve Board. FDIC Study of Overdraft Programs. |