Overdrafts: The Banking Penalty That Just Won’t Die
Despite the 2010 update to the Electronic Fund Transfer Act, which was intended to protect customers from ghastly overdraft fees, customers who for whatever reason fail to get the necessary protection — and complicated contract language on the part of banks is certainly one of them — are still getting plowed with high penalties when they overdraw.
— Posted by Alexander Reed Kelly
WAIT, BEFORE YOU GO…
… Pew’s study found that many financial institutions are failing to clearly disclose the costs associated with overdraft protection and that the fees are still unnecessarily high, especially when so-called extended overdraft penalty fees kick in.
Overdraft penalty fees, which are charged the first time you overdraft your account, came in at a median of $35 at banks and $25 at credit unions, unchanged from the previous year’s survey, Pew found. But extended overdraft penalty fees, which are incurred if your account remains overdrawn for a certain period of time, have increased by 32% to a median fee of $33. About 99% of checking accounts charge an overdraft penalty fee, and 64% of those accounts also incur an extended overdraft fee — up from 45% in 2010.
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