Lots of us who are on the ChexSystems list are dying to get any good checking account. When you do find a new bank account, make sure you read the terms of the account carefully. In particular, check out the overdraft protection rules. Banks make LOTS of money off of these things (at our expense).

A consumer group recently conducted a poll of overdraft protection programs. The poll, conducted by the Consumer Reports National Research Center, found that many consumers do not understand how overdraft programs work. According to the poll, 39 percent of consumers thought that their bank would either deny a debit transaction or allow it to proceed without charging a fee if it would overdraw their account. Nearly half of those polled (48 percent) thought their ATM card would not work if they attempted to withdraw more money than was available in their account.

Here’s the problem. “Most banks automatically enroll their customers in so-called ‘overdraft protection’ programs, which are really high-cost loans that cost consumers billions of dollars every year,” said Lauren Zeichner Bowne, Staff Attorney for Consumers Union. The Consumers Union has teamed up with a number of other consumer protection agencies to ask the U.S. Federal Reserve Board to take steps to protect consumers from unfair overdraft loan programs by stopping the fees unless the consumer makes the choice to opt-in to the loan program.

Banks collect an estimated $7.8 billion in fees from overdrafts triggered by debit and ATM transactions. These overdrafts could be prevented with a simple warning or if the transaction was declined. Instead, most banks let these transactions go through and charge consumers a fee for each overdraft. The FDIC found that the median fee for overdrafts is $27, even though the average overdraft is triggered by transactions totaling $17.

Until the Fed acts (if they ever do), you need to protect yourself by reading the terms of your new bank account carefully. Watch out for automatic overdraft protection programs, and if your bank account has one, make sure to avoid triggering it!

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Related ChexSystems Banking Information:

1. Will New Overdraft Rules Increase the Number of People on the ChexSystems List?
2. Do Banks Encourage NSF Transactions?
3. How New Banking Rules May Impact Your Second Chance Bank Account
4. On ChexSystems? You Need to Understand Checking and Savings Accounts
5. Bank Accounts for Non-Residents — Why So Difficult?