6 Sneaky Ways Banks Try to Separate You from Your Money
Don't fall for these tricks of the banking trade.
What Banks Are Doing: Charging Overdraft Fees
Lose track of your account balance and make a withdrawal or online payment you can’t cover, and you could get hit with an overdraft fee, typically around $35. According to the Consumer Financial Protection Bureau (CFPB), overdraft and insufficient funds penalties totaled $11.2 billion in revenue in 2015 for big banks with assets of $1 billion or more, accounting for 8% of their total net income. “These fees are a longstanding problem,” says Gail Hillebrand, an associate director at CFPB. “For consumers, the numbers can be scary.”
What Banks Are Doing: Processing Bigger Transactions First
Say you write a check for $50, then one for $100 and another for $750 on an account balance of $740. Rather than processing checks in the order they were written, some banks process the check for the largest amount first, which means you might have to pay three overdraft penalties instead of just one.
What Banks Are Doing: Holding On to Deposits
Banks may credit your account after they process withdrawals and payments. Even when deposits are credited first, banks can make you wait up to two business days for funds from non-cash deposits to become available (for electronic ones, such as payroll direct deposit, it’s one business day). If you tap that money as soon as it’s deposited, you might risk overdrawing your account.
What Banks Are Doing: Nixing Free Checking
It used to be available at almost every bank. Not anymore. These days “free” simply means you won’t be charged for not meeting a minimum balance. However, you may still have to pay for routine services like ATM withdrawals, stopping payment on a check, or even just viewing your balance at a non-bank ATM.
What Banks Are Doing: Charging for Human Help
Some financial institutions are imposing fees for each transaction with a live teller. Other banks may fine you for “excessive” teller use—that is, more than twice a month.
What Banks Are Doing: Collecting Closing Costs
Think twice before opening a new account that you’ll need for only six months or less. If there’s one banking activity that should be free, it’s the simple act of closing an account. But some banks are now charging for shutting one down.
More Ways to Stay Protected
- For debit cards, don’t “opt in” for overdraft protection. It can easily be avoided by reading the fine print. Instead of imposing a fee, the bank will simply decline the transaction.
- Link your checking and active savings accounts so that money from the latter covers your transactions. The transfer fee is typically $10 or $12—a third of the typical overdraft charge.
- Shop competitively for the best terms on “free” accounts. “In some instances, it may be better to pay a $5 monthly fee rather than get hit with unexpected charges,” says Hillebrand. “It’s not fun keeping track of the numbers, but it will save you lots of money in the long run.”
Got questions about your bank accounts? Get answers at consumerfinance.gov/askcfpb.