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Protect Yourself From the Bank Bounce Fee Bite

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Banks have taken big financial hits over the past year, in part because of the subprime mortgage meltdown. Now they are scrambling to recapture their losses. One of the ways banks are doing this is by charging fees. Most commonly charged are "bounce fees" and "overdraft fees," which are punitive charges to customers when they spend more than they have in their accounts.

It used to be that if you didn't have enough money in your account to cover a check you wrote, an ATM withdrawal or a debit card purchase, the bank would deny payment. Embarrassing, right? These days, banks and credit unions are far more apt to cover you if you overdraw your account, not because they care about you or want to save you the embarrassment of bouncing a check or transaction, but so that they can collect bounce fees.

There are two ways that a bank or credit union can cover your overdraft: using its money or using your money.

—Bank's money. Calling it a "courtesy bounce," the bank may use its own money to float you a short-term loan to cover your mistake. The bank doesn't ask you whether you want this loan. It just gives it to you, and it will cost you dearly. Even if you go over by only a few dollars, prepare to get slapped with a "bounce fee" of $29 to $39 per item.

That's not all. Most banking institutions now charge daily fees of $5 or more each day you remain overdrawn.

That's on top of the original fee and the loan they made to cover your account. If you really mess up and you bounce several checks or keep swiping your debit card without realizing you've gone over, the fees just keep piling on.

—Your money. Also called "overdraft protection," this is a provision that you must arrange for ahead of time. You can set up a line of credit (like a credit card account), called an overdraft protection account, or you can identify a savings account from which you want the bank to pull the money to cover your overage. You would pay a fee to transfer the funds if this were to happen, but it would be considerably less than a courtesy bounce fee.

Your bank or credit union will default to a courtesy bounce plan if you have not taken the steps necessary to set up overdraft protection. Don't expect it to ask for your permission. Courtesy bounce fees have become a lucrative income stream for banks.

Do you know for certain how your bank or credit union would handle overdrafts on your account? Pick up the phone and find out right now. If you do not have overdraft protection in place, set it up now, even if you believe that you never, in a million years, will bounce your account. Stuff happens. You'll be glad you did.

Mary Hunt is the founder of www.DebtProofLiving.com and author of 18 books, including her latest, "Can I Pay My Credit Card Bill With a Credit Card?" You can e-mail her at mary@everydaycheapskate.com, or write to Everyday Cheapskate, P.O. Box 2135, Paramount, CA 90723. To find out more about Mary Hunt and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.

COPYRIGHT 2009 CREATORS.COM


Comments

3 Comments | Post Comment
Banks are in the business to make money. So are credit card companies. I have NEVER bounced a check, EVER! I have only paid a FEE of ANY KIND on my credit cards, once or twice...I am in my 50's. Banks give you that overdraft protection because they make money off of people who don't have a CLUE on how to keep a checking account. AND if you do by accident bounce a check, only the bank will know, and you will only have a fee at the bank not ANOTHER fee where the check bounced. (or overdraft) ALWAYS keep an extra $100 in the bank. Can't afford to DO that? Don't have a checking account. Deal only in cash. SPENDING MORE than you HAVE is IMPOSSIBLE, with CASH! Times are tough. I don't have a job. I get $30 a week while living with a friend for keeping house and cooking. BELIEVE ME, I have found out I can live off of VERY LITTLE!!
Comment: #1
Posted by: Katie
Tue Sep 22, 2009 6:14 AM
Chase Bank charges $6 per $100 for overdraft fees and I've used it a time or two. Need to balance my checkbook more often if I'm getting the balance down low enough for this to happen. I have paid a fee on my credit card for forgetting to get the money in on time. Now I get email notices and paper bills, both, and keep a calendar with information on when to expect bills. Verizon Wireless lets me have my Discover card pay the bill automatically. Since I pay off the credit card bill in full every month, that helps me out. There are too many fees for keeping a checking account (I have direct deposit and avoid all but the fee for more checks) but it is the best way to prove you've paid when a company says you didn't. And that does happen. Companies make mistakes. You will save money by shopping only with cash but working only in cash means you can't order your printer ink refill from Dell with just a few keystrokes and your credit card number. You just have to be able to pay everything off every month or don't get it in the first place and try to find a bank with the fewest fees possible. I'm 67 and show you can do it even with a checking account and credit cards.
Comment: #2
Posted by: BB
Tue Sep 22, 2009 8:01 AM
We have overdraft protection linked to a credit card. Because of the way we get paid now, as opposed to the way we got paid a year or so ago, some of our direct transactions occur a day or so before a paycheck is deposited. I found that we could use the overdraft protection with no fees, while transferring money would cost us. It bothers me to go into overdraft (which I then immediately transfer back to the card), but I decided it was cheaper than doing a money transfer. We used to get paid once a month, and so I paid everything off at the first of the month. Now, we get an every-two-week check and some of our creditors still expect payment during the first week or so of the month.
Comment: #3
Posted by: Joannakathryn
Tue Sep 22, 2009 12:15 PM
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