I would have guessed 1-2. 7.1 is a lot, although it’s actually down from close to 10 a few years ago. I’m curious what the distribution looks like. That average is pushed up by folks who, like someone interviewed for the article, have 12-15 incidents per year. And down by the hefty number (I hope) who never overdraft. I couldn’t find any further information, even the median number.
Apparently consumers, on average, had $4434 in checking accounts last year.
I knew that overdraft fees were big money, but I didn’t realize they were $32 billion big.
My last overdraft was at least ten years ago. It was pretty humiliating. There’s nothing worse than having to retrieve the check from the store manager and pay cash. I swore than it wouldn’t ever happen again.
I got more careful and started keeping a larger balance to avoid overdrafts. The last I heard banks were charging $30 for an overdraft? Plus the store has a fee too.
Is there a certain number of hot checks a person can bounce before the cops are called? I’d be terrified to bounce 7.1 checks. That seems so excessive that the bank would close the account.
I suspect that most of these folks have some sort of overdraft plan through their bank. I understand that the charge is not denied, but the account holder is fined. That’s what the guy in the article had. $17.5 per overdraft, and 12-15/year. That adds up.
The average fee is $30, but I don’t know what flavor of overdraft that is for. Perhaps it’s more for a “bounce” and less if you have one of these plans.
I overdrafted once, in college, when a recurring subscription (that I didn’t realize was recurring) automatically renewed from an empty bank account that I was no longer using but hadn’t gotten around to closing yet. I was over 18 but my mom’s name was, I guess fortunately, still on the account, so she opened the overdraft notice and alerted me. I was completely mortified. She went down to the bank the next day and fixed it, I paid her back, and haven’t made that mistake again.
I think it was something like a $35 overdraft fee, plus the $100 overdraft itself.
I think it’s more a matter of how large a check you can bounce, and mainly how long you can put off rectifying the situation before the cops are called. No business I ever worked for would call the cops over, say, a $35 check that you came down a couple days later and took care of, although if it happened more than once we’d quit accepting checks from you. If we had to chase you around to get it dealt with, though, we’d eventually take it to the law.
And banks love it when you overdraft, provided you take care of the situation. A single overdraft charge is higher than the maintenance fees on the checking accounts that charge fees, and one overdraft makes it easier to have more overdrafts, racking up multiple fees.
How does the store know? The whole point of an overdraft is that the bank paid out more than was in your account, isn’t it? If the store didn’t get its money, then the bank didn’t overdraw your account…
Banks want customers to overdraw their accounts regularly. That’s why automatically signing customers up for overdraft “protection” had to be made illegal.
When I was fresh out of college money was really tight, and my landlord sat on my rent check for about two weeks and I didn’t realise it - I thought my family had dropped some money in there for me like they did every once in a while. I overdrafted because of the rent check, and then I used my bank card (and it was accepted) all that day, just for normal daily stuff - gas, groceries, Target, whatever.
So, from my perspective, that’s one overdraft incident, but the bank originally charged me for each individual debit (and they ranked them from most to least money so I’d get hit by all of them) and there was like 6 individual charges on there. So then I was broke, and out $35x6 in addition to being broke.
I successfully negotiated the bank down to just the original first overdraft from that morning, but if that article was counting something like that and I hadn’t been able to go into the bank to contest it successfully, that’s your 6-7 overdrafts right there in one day, none of them for more than $20 each.
Now, if they mean separate incidents, that’s a bit high. I’m not the best at tracking my finances, and I’ve been really tight on funds a few times, but I think I’ve only overdrafted two or three times in my life. It’s stressful and embarrassing, so it is a little shocking to see it’s so common.
I had one client rack up $3,000 of overdraft/NSF fees in one year. At one point, the account spent nearly 45 days continuously overdrawn.
That totally blew my mind until a couple of years later when a different client hit $12,000 in one year. At $35 each, that’s 340 fees assessed… though it’s fair to point out that some checks bounced more than once because people tried to re-deposit them.
These were both businesses, so they don’t look like an average person, but in both cases, we were looking at about 5% of the total expenses on bank fees. Neither had their accounts closed by the bank - I’m sure the bank was loving every minute of it.
I’ve had zero lifetime overdrafts. And I paid off my entire credit card every month. Until recently. Things went downhill quick
Bank tellers can see how many you have. IIRC it was “overdrafts in last 6 months” or something. I’ve seen people with 20, 30. A lot of times I think that they aren’t going to get better at this or other financial things.
We could see it because it was an important part of the decision to say, put a hold on that giant, out of character check you have (in combination with other factors).
If you mean that banks phrase it so that the ability to get an overdraft is a good thing, then sure, they might do that. But I’ve only heard “overdraft protection” to mean that if you go over they’ll take the difference out of your savings or credit line and apply it to the checking. A fee might apply.
And I see scr4’s link describes it too, and am confused why that is a bad thing? Not great, but better than the alternative they give. The page says the opposite.
I guess I’m thinking of something else. It’s whatever the service is where instead of having the card terminal deny your card because you don’t have money, it silently puts your account into the red and charges you a massive fee.
Yeah that’s what I thought. They try to make it sound like having the “old way” will remove any embarrassment of being denied, so why not opt in? Apparently there are people who would be mortified, but I figure paying out the ass is worse.
The check writer gets charged an overdraft fee. Usually >$20. The intended recipient might get an NSF fee, which is usually lower. <$10 as I recall seeing, but the internet is telling me it almost as high as the OD. This is charged because the bank accepts the check, not knowing if it’s covered, as they can’t (and shouldn’t) know about accounts at other banks. They get the money, and might be able to use it for awhile, then the bank takes it back as it’s not “real money.” Retailers often have signs saying they charge $25 or something if the customer’s check bounces.
If you present a check from Bank of the World and either someone cashes it or deposits into a BotW account, the computer will tell you if it’s not covered, and we’d inform the customer and tell them to call/yell at the person who wrote it. If they were adamant, we could contact the writer and ask if it’s okay.
Debit cards, if they have the no funds = don’t accept thing will do just that. If it’s opted in, I’m not completely sure what happens but maybe similar to a NSF check.
And if you post date a check, the bank can choose not to take it if it’s too soon, but that’s more of a courtesy. I’m not aware of any place where post dating is legally binding.
Overdraft fees are (were) one of the bank’s biggest moneymakers, at least on the brick & mortar side.
Depending on the bank, a lot of that money might not have been individual overdraft fees. Some banks charge you the initial fee, and then a $5/day fee for being overdrawn–and they notify by mail rather than phone, so in the case of honest miscalculation it can be 3 days or so before the customer knows there’s a problem. That’ll be an extra $15, please. Or if you’re having cash flow issues and don’t have the overdraft amount plus $50 lying around to cover those fees (and if you’re cutting it that tight you more than likely don’t have that lying around) and have to wait until payday to take care of it, that’ll be an extra $30 or $50 or more. And that’s assuming you don’t have a Lasciel situation going on. That situation’s over $200 in the fees, plus $5 a day for however long it takes you to come up with enough to cover the overdraft plus the fees…:eek:
I lived with a boyfriend for 4 years. During that time he paid well over $10K in overdraft fees. I think he averaged about $300 a month. He had overdraft protection, and would purposely overdraw his account the same night his check was auto-deposited, then remain in the hole until the next deposit. The bank LOVED him!
My bank charges $38 for an overdraft and and additional $8/day fee. I really, really try not to get overdrawn because that hole gets deep very quickly.
How does the store know? The whole point of an overdraft is that the bank paid out more than was in your account, isn’t it? If the store didn’t get its money, then the bank didn’t overdraw your account…