Banks can’t seem to quit charg­ing over­draft fees

The Denver Post - - BUSINESS - By Bloomberg News

Of all the many fees that banks charge, the over­draft fee may be the most per­verse. And the most in­fu­ri­at­ing.

Over­draft ser­vices be­gan decades ago as a cour­tesy by banks to their cus­tomers: If you didn’t have enough money in your ac­count to cover a check, your bank stepped up, sav­ing you the has­sle and em­bar­rass­ment of bounc­ing it.

Now that debit cards and re­cur­ring pay­ments are in­creas­ingly pop­u­lar, over­drafts can mul­ti­ply as quickly as Grem­lins in a swim­ming pool. One over­draft — a large rent check clear­ing, for ex­am­ple — can lead to many oth­ers. And it may be days be­fore you re­al­ize you’re trig­ger­ing a $35 fee ev­ery time you pull out your debit card.

That fee of $30 or $35 might not seem like much, but the Con­sumer Fi­nan­cial Pro­tec­tion Bureau es­ti­mates that the me­dian debit card pur­chase trig­ger­ing an over­draft is $24. In other words, the typ­i­cal debit over­draft is es­sen­tially a loan with an in­ter­est rate that, in an­nual terms, mea­sures in the thou­sands of per­cent­age points.

Fi­nally, most over­draft fees are en­tirely avoid­able. Banks don’t need to of­fer the pro­tec­tion of pay­ing them on debit and ATM trans­ac­tions. They could sim­ply de­cline a trans­ac­tion if there isn’t enough money to pay it. More­over, con­sumers don’t have to sign up for ser­vices that sup­pos­edly pro­tect them from over­drafts.

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