Overdraft fees cost Americans $8 billion. Are you one of those affected?

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The amount the big banks take in overdraft fees is shocking.

Key points

  • The big banks made $8 billion in overdraft fees during the year.
  • These fees are paid disproportionately by those who can least afford them.
  • Overdraft fees can be avoided by leaving more money in your account and checking your balance regularly, or even changing banks.

Overdraft fees are a huge problem for millions of Americans. In fact, the total cost of these fees amounts to $8 billion over the course of the year – and this expense is borne disproportionately by low-income people who have the least money in the bank.

Although the specific amount of this fee may vary from one financial institution to another, it usually amounts to around $30 for each instance when someone tries to withdraw more money from their bank account than what is required. is available to him. These fees add up considerably, with customers who pay them accounting for more than half of all profits made by consumer checking accounts offered at the largest US banks.

Unfortunately, those who pay these fees can often find themselves in a precarious situation because they already had little or no money in their accounts to cover their fees, and now the bank has taken more of their money.

If you’re one of the many being hit by overdraft fees, it’s important to understand your options.

What to do if you are affected by overdraft charges?

If you’re regularly faced with overdraft charges, chances are you already know the damage these can do to your finances. Because they can be so damaging, it’s important to find ways to avoid them.

In an ideal situation, you’d be able to ensure you don’t get hit with overdraft fees by keeping some extra money in the bank, so if you miss a fee or have transactions processed in an unexpected order , you would still have a cushion in your account. But, the reality is that this is impossible for many people who simply don’t have a lot of extra money to keep in their checking accounts.

You can also keep a close eye on your account, using an online app to check your balance before charging anything to your card or signing up for alerts if your balance drops too low. It’s a solution if you don’t have a lot of money to spend, but it can be tedious and it’s not a foolproof approach because the unexpected can always happen.

The best option to avoid overdraft fees

Finally, your last and best option is probably to find a bank that does not charge overdraft fees at all if you are at risk of being hit by them. A growing number of banks have dropped these fees in light of increased scrutiny from the Consumer Financial Protection Bureau and because fewer consumers are paying them as more people have extra cash during the stimulus.

It will still take some research to find a bank that won’t charge you, as a recent Morning Consult survey found that 7 out of 10 customers were charged after discovering their accounts. But if you can take the time to find a bank that promises — and keeps — its no overdraft guarantee, you don’t have to find yourself among the many consumers who help banks make an $8 billion annual profit. .

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