Tales from an Ex-Banker
Time for A Confession: I was once a personal banker, but before I was allowed to assist people in regards to their finances and be of service to them in a head to head situation, I was forced to act as a bank teller. For the most part, this was a pleasant enough situation, except for one key aspect of it; calling to tell people that their bank accounts had gone into the negative.
Imagine the act of having to call someone and tell them that not only are they out of money, but that they also have to pay for not having any money once their transactions are finished clearing.
Keep in mind that these are people who knew me, some even who have known me my entire life. They are people who trusted me to look out for their best interests and yet, I was completely and utterly powerless. Sure I could put in for a fee reversal, but even that was only good for first incidents and for nothing after that first time.
It goes without saying that this issue has been an easy button to press of mine ever since then. Even before the Great Recession had it, I had long since left banking, but I was still so very relieved when I read about the regulations that were being instated that would help end this horrible and painful madness. It appears now that the overdraft problem is back and only worsening from before. As such, I would like to take this opportunity to teach you how to avoid the seemingly never-ending spiral.
Overdraft Fees and Why They Are Rising
Fees from overdrafts are extremely vital when it comes to banks and how they make money and profit. In fact, they are the bulk of revenue made from checking accounts. Almost thirty-two billion dollars in revenue was generated from overdraft fees alone in 2013. Fees run up to fifty dollars for each and every transaction according to some surveys. These are used to make up the money that banks are losing due to the decline of rates of interest.
Because of this, banks increase the amount of fee per individual occurrence and seek new customers that would be most likely to overdraft.
Questionable Business Practices?
Banks are considered businesses just like anything else and so you simply cannot blame them for working on ways to earn money while trying sustain themselves. After all, they do have deep costs to provide for even their services that they do not charge the consumer for, but the act of actively seeking out people who are more probable to incur overdraft fees is a questionable business tactic at best.
How to Avoid These Nasty Overdraft Fees
-You might be best off opting out of overdraft protection-Really
The best way to keep away from having to pay overdraft fees is simply to opt out of the protection. In this way, your bank simply declines transactions that would otherwise take your account into the negative. This is up to the individual though as sometimes it might be more beneficial to make sure an important bill is paid on time even at the risk of incurring an overdraft fee. Even so, some bills from online and those associated with checks can still usually come out even without having the individual’s approval.
-How to Best Buffer Your Account without the Need for Overdraft Protection
The best option for most people is usually to link your account from savings to your checking account. Then the money can simply come from savings instead of coming from the regular account and causing an overdraft fee. This same thing can also be accomplished with a credit card or some other personal credit line. This will just require a carefulness on your part to keep you from going into debt.
-Understand the differences-Know Your Money
Becoming reliant on online balancing as opposed to keeping a checkbook registry could come with the very real possibility of putting you at higher risks in regards to over-drafting fees. This is because most people do not understand the difference between their account and available balances.
The balance of your account refers to how much money you actually have in the account. This does not take into account and debits or credits that are still pending.
The available balance of your account, however; does take these debits and credits into consideration and so it is actually the money you possess currently. Some of us like to try to beat the charges that are pending, with the knowledge that everything might not come out the same day, but this is extremely dangerous and should be avoided at all costs as you are almost certain to end up in the negative and get stuck with extra charges and overdraft fees.