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Overdraft fees, the bane of Whistleblower readers, are big money for banks, USA Today reports

Posted on July 10th, 2009 – 2:48 PM
By James Shiffer

Maybe I’m naive, but Whistleblower was astonished to read that overdraft fees of the sort that tormented Katie Trottier and numerous other readers are a major profit center for banks, USA Today reporter Kathy Chu reported this week. I guess I labored under the impression that the fees still reflected some actual cost on the part of the bank - in fact, they’re short-term, unregulated loans that banks count on to bolster their bottom lines by an estimated $38 billion this year. As Chu reported:

Today, each of the nation’s 10 largest banks allows consumers to overdraw with checks, debit cards or at ATMs, a 2009 USA TODAY survey reveals. Large banks also reserve the right to process large transactions first, triggering more overdraft fees by emptying the account more quickly. Some even charge consumers before they overdraw by deducting a purchase when it’s made, rather than when it clears, pushing the account into the red sooner.

Those banks include Wells Fargo ($35 overdraft fee) and U.S. Bancorp ($19-$37.50). Some of you have complained about these practices, finding out about multiple overdraft charges at the same time, or banks delaying deposits so that overdraft fees can be charged. While some in Congress are talking tough about overdraft fees, others say it’s a natural result of the government’s crackdown on another profit center, credit cards. One expert told USA Today that without overdraft fees, nearly half of the nation’s banks and credit unions wouldn’t have turned a profit last year.

USA Today partnered with ABCNews Nightline for this story, so if you’d rather see a video version, click here.

This entry was posted on Friday, July 10th, 2009 at 2:48 pm and is filed under Buyer beware. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

8 Responses to “Overdraft fees, the bane of Whistleblower readers, are big money for banks, USA Today reports”

  1. melissa Says:
    July 14th, 2009 at 2:14 pm

    Yeah like Wells Fargo, you can go in there an deposit CASH to cover a check and then they put the CASH on hold and charge you an Overdraft fee! Crock of BS

  2. chad Says:
    July 14th, 2009 at 8:42 pm

    I know I shouldnt be overdrafting, but lets face it. It happens.

    Lets say you overdraft mult times in one day. Wells fargo will switch
    the purchases around so the largest purchase will draft first.
    Thus forcing more over drafts for the smaller purchases.

    I know my fault for overdrafting, but shame on Wells Fargo. These are the people
    that need the most help and they are taking advantage of the situation!!!

  3. Doug Says:
    July 15th, 2009 at 8:32 am

    another tactic all banks use, they clear the largest purchases
    first so you get overdrafted on small transactions that would
    have cleared otherwise.

  4. Todd Says:
    July 15th, 2009 at 11:49 am

    Yet another Wells Fargo scam. I used to have “Overdraft Protection” which cost me $25 a year. They gave me a line of credit account of $5000.00 which they would draw out of whtn you would overdraft and also would start drawing interest immediately. This was not a big deal since I paid it back right away but as of last February they sent me a notice saying that they are going to start charging a $10.00 fee everytime they have to electronically transfer money over to my account. My question was then, Ok what am I paying the $25.00 annual fee for? .. Their response, Well that’s for the privilege of having the LCA account. Me: Ok, what do you call “Overdraft PROTECTION” if you’re charging me ten dollars everytime I overdraft? Their response, (No Kidding), Well sir, paying ten dollars is better than paying thirty nine dollars… You’ve got to be kidding me! They are blatently and legally ripping people off. As a member of this franchise since 1974 I have now moved all my money into a credit union. Check it out, Almost all the services that wells fargo charge you for are FREE at the Credit union. I should have left long ago, as all wells fargo wants to do is have their fingers in your pockets as much as they can.

  5. Joe Says:
    July 15th, 2009 at 12:38 pm

    Leave the bank and join a credit union. I made a
    25 cent mistake and it cost me over a hundered bucks.
    Now at my credit union if it is truely a minor error they
    don’t charge me an overdraft and they cover my check too.
    You just have to be responsible and not abuse it. Plus
    the people are much nicer too.

  6. Yo Says:
    July 15th, 2009 at 2:49 pm

    Well said Todd - yet ANOTHER Wells Fargo scam. I got the same response when I called about the new $10 fee. In fact, I was so surprised, I called twice to try to get them to change their mind… with no success.
    After 30 years, and almost 20 various products, I’ve finally had enough with Wells. For those in St. Cloud, I strongly recommend checking out Liberty Savings Bank - great folks, great products, and fees that make sense…

  7. Jo Says:
    July 16th, 2009 at 10:33 am

    Yes, by all means keep track of your money to avoid overdrafts. Problems come in when you’ve discontinued automatic billing, yet the business still bills you, or when merchants “accidently” double bill you, or similar issues. No one would continue to note a recurring monthly $20 charge when reconciling their account after they’ve discontinued that service, nor routinely double every charge in case they were accidentially double billed. Even if the account holder made an “honest mistake” I don’t feel the bank needs to waive fees (it’d be nice though), but if it’s the merchant/vendor mistake, the bank should waive the fee and not make the account holder pursue the merchant/vendor for the bank fees. The merchant will likely only take the extra/wrong charge away then tell you to take up the bank fees with the bank. I always round up to the next $5 so I have a cushion, check my statements for unexpected charges and find my actual balance quarterly.

  8. Arvind Says:
    August 7th, 2009 at 11:58 pm

    I got charged more than 250$ overdraft fee by Bank of
    America, although I had signed up for an email
    alert in case I was going on overdraft. Conveniently
    for them, the customer support said their “records”
    indicated that I had not signed up for alert even though
    I had an email confirmation from them that I did.
    I’m planning on changing banks to ING Direct, at least
    they don’t have any overdraft fees.

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