An expensive mistake, and a request for recommendations

[FarmerDenise]

My overdraft protection is attached to my saving account. So they only pull out as much as I have in there and they charge a fee. But it is better than bouncing checks all over the place. The fee is $10.00 opposed to $35 for every bounced check. They also send me a notice, whenever they do this. So I can fix things in a fairly short amount of time. I also bank with a small local bank.

 

[Lady Henevere]

Thanks, everyone, for your input. I really appreciate it.

I did ask the bank to work with me on this, and they did a little but not very much. The original fees totaled -- ready for this? -- $825. They reversed one fee that was erroneous ($33) and three as a "courtesy." The other $693 dollars in fees, they say, is my problem. I threatened to move my checking, savings, and credit card to another bank, and they said if that's what you want to do, then go ahead. I am therefore in a market for a new bank and I am considering legal action.

I don't have a problem with overspending on a regular basis; this mistake was because I accidentally double-paid a large bill (kind of like Pat's hubby's mistake with the decimal point). But I don't save as much as I should either, and you all have provided a lot of good tips about keeping some for bills, transferring some to savings, and taking the rest in cash. I think once I find my new bank I will try that one out and see if I can make it work and save some money too.

I tend to have trouble with banking thanks to dyscalculia (similar to dyslexia, but with numbers), so I'm kind of doubly-mad since I thought I finally found a system that worked for me, and here I messed up again! So the information and advice you all have provided is very valuable to me, since I have perpetual trouble making this work. Thank you again!

 

[sylvie]

Thanks, everyone, for your input. I really appreciate it.

I did ask the bank to work with me on this, and they did a little but not very much. The original fees totaled -- ready for this? -- $825. They reversed one fee that was erroneous ($33) and three as a "courtesy." The other $693 dollars in fees, they say, is my problem. I threatened to move my checking, savings, and credit card to another bank, and they said if that's what you want to do, then go ahead. I am therefore in a market for a new bank and I am considering legal action.

Those excessive fees are just criminal, IMO. It's a good argument for banking reforms and a consumer protection agency. Not sure if those currently proposed will be all that effective. And most likely won't be retroactive to help you.

 

[reinbeau]

Actually that is not always true. Overdraft protection is a loan. If you overdraw and the money is not replaced in a set time then it accrues interest. Banks have much tighter lending requirements than a lot of credit card issuers. You probably have very good to excellent credit and have not had to deal with denials. There are a lot of people that can't even qualify for a checking account.

Credit card charges are a form of a loan, too. I think most here understand how these things work, and obviously we all have checking accounts, or we wouldn't be discussing them. Overdraft protection is a good thing, if you can get it attached to your banking accounts, then it's a smart thing to do. That is the only point trying to be made here.

 

[Ldychef2k]

 

[Lady Henevere]

If this is how overdraft protection works (my experience, I mean), I don't want it. I would much rather have my debit card declined at Starbucks than pay $33 for the $3 loan they gave me to buy a cup of coffee.

I do see the point, of course, for big things like mortgages and car payments. For a thousand dollar mortgage payment, a $33 charge is just fine. For a cup of coffee, on the other hand, it is ridiculous. They could have easily declined my card -- important payments are not made at point-of-sale debit machines in $3 increments. That's how it used to work -- if there was no money in your account, your card didn't work. But not anymore -- they realized they were sitting on a huge potential money maker by approving transactions and charging fees for each. (I agree with sylvie -- I think fees like this should be criminal too. I'm working on a letter to the senator in the banking committee who just proposed legislation to limit these fees.)

Perhaps overdraft protection would work best if it were limited to checks and automatic payments from the bank (since these tend to be bills, etc.), and it did not apply to ATM withdrawals unless notice is provided at the time of the transaction, or point-of-sale transactions. If I ran the world, that would be the rule.

I do have a savings account with the same bank. After I change banks, I will have to look into linking the two for overdraft protection, as many here have mentioned. It sounds like it may be a less expensive option (although I am hoping I won't ever need it again!).

 

[Big Daddy]

Naturally I don't know what happened in your specific case. Sometimes retail places run your card and it shows you have money in your account so it gets approved. That little machine accumulates the transactions throughout the day. At the end of the day the manager is supposed to batch all the transactions and upload them to their bank. Sometimes they don't do it for a few days. So you will be happily using your ATM card which shows you have money in your account. Every time you buy a cup of coffee with it it counts as a transaction. Then the retailer finally batches his credit sales and the big sale comes in to your bank the same day as all the small sales. At that point if they were not crooks they would pay all the small sales first. Then they would charge an overdraft on the big sale that didn't clear. I would like to get in to the whole banking thing and what Congress is trying to do about it, but I can't.

I would get another account if you can. Banks are pretty picky now. Hopefully those overdrafts aren't on your record yet. Even though they rape you with charges and make a huge profit, they still hold them against you. Sometimes other people hold all the cards.

 

[reinbeau]

If this is how overdraft protection works (my experience, I mean), I don't want it. I would much rather have my debit card declined at Starbucks than pay $33 for the $3 loan they gave me to buy a cup of coffee.

If your bank charges you to go into your overdraft then no, it isn't a good deal. Mine doesn't.

 

[Lady Henevere]

I would get another account if you can. Banks are pretty picky now. Hopefully those overdrafts aren't on your record yet. Even though they rape you with charges and make a huge profit, they still hold them against you. Sometimes other people hold all the cards.

Yikes -- I didn't think about that! Oh, great -- something new to worry about. All the overdrafts were repaid within days, I have good credit, and I'm very stable (long time address, long time job, etc.). Hopefully it won't be a problem. And yes, the bank did run a larger charge first, causing one overdraft that wasn't necessary. The rest happened on subsequent days. And I didn't realize that retailers sent their charges sort of sporadically -- that explains some of the wacky dates on my charges. (I noticed, for example, that I got charged today for lunch earlier this week.) Thanks!

Rainbeau, yours doesn't charge?!? That's awesome. Excellent deal -- hold on to that account. This is definitely something I will be asking about as I shop for a new bank.

Edited to add: I just found out about reporting systems, like chexsystems, that allows banks to report all nonsufficient funds activity to a central company. Then people try to go open a new account and get denied because they have a negative report on there. According to Wikipedia, "many consumers who have kept positive banking relationships for 30 years may have their accounts closed and be blacklisted from opening new accounts based on a single banking error." Holy cow, this is a nightmare. Maybe that's why those people at the bank were so smug when I threatened to close my account.

 

[me&thegals]

At our bank, if our savings acct stays at a certain level, we get free overdraft protection. It actually just happened to us this month. Somehow we messed up recording our balance somewhere, thought we had 100s more in our checking account than we did, but were actually causing overdrafts. Our protection kicked in, "loaned" us $ to our checking acct, and then charges interest. Because we find out fairly soon, we get to the root of the problem, pay back the loan immediately and end up with less than $1 in interest payments.

Can you look into some type of free overdraft protection like that, if you can keep a decent balance in your savings acct?

Also, we just found out our bank has free online banking. We are going to go this route, since THEY keep track of the balance for us. Of course, we will still record everything, doublecheck it against our statements and their online record, but it should eliminate faulty recordkeeping on our part and accidental overdrafts. Can you look into this, too?

And yes, the bank did run a larger charge first, causing one overdraft that wasn't necessary. The rest happened on subsequent days. And I didn't realize that retailers sent their charges sort of sporadically -- that explains some of the wacky dates on my charges. (I noticed, for example, that I got charged today for lunch earlier this week.) Thanks!

That drives me nuts. Maybe it's just business, but it seems unethical to me. I think that's pretty much how ALL banks operate.