Banking fees have been a sore topic for quite some time. With the recent Wells Fargo scandal still fresh in our minds, we have more reason to distrust large banking institutions. Everyone knows that in lending and loans, you’ll want to watch the APR and interest rates. But what do you need to watch out for when you’re banking with your national bank? Overdraft fees. It’s something that you don’t quite see coming. Many of us are busy running our business and your bank account overdrafts. It can happen to the best of us. The fee is disguised as a service to help consumers, but is essentially a short-term loan with an enormous interest rate. Unfortunately, the documentation of this fee is buried deep in your account paperwork and many are unknowing of such thing.

Overdraft fees work when a consumer has overdrawn their bank account. Their banking institution allows the account to go negative and then adds their overdraft fee. It allows you to continue drawing money out of the already negative account. There’s no warning of the event happening, and banks conveniently don’t decline your transactions either. The fee is anywhere between $20-35 and can be applied as many as 6 times for every additional transaction. Bank automatic overdraft protection has been the cause of controversy for years. While Banks claim to be doing a service, consumer protection groups argue that they’re flat out robbing people. When you calculate the overdraft fees as APR, many banks are charging 3000% compared to 350% payday advance APR. It’s outrageous. A Pew Trusts Foundation study revealed that banks collected over $32 billion in overdraft fees in 2011. The fees are one of the banks biggest sources of profit, so much that one bank was caught rigging the way transactions would clear- for maximum overdraft fees. In 2010, Wells Fargo was ordered to pay a 203 Million settlement over excessive overdraft fees. Unfortunately, this settlement was just a drop in the bucket for the Banking Giant. It wasn’t enough to eliminate overdraft fees and banking institutions still have these excessive overdraft fees. The average overdraft fee from the 5 largest banks is $30. Even with so many safeguards in place against predatory lending, you would think that overdraft fees wouldn’t exist. The fact is that overdraft fees will be around for a long time – at least until consumer protection policies are put into place.

How can you take action and prevent overdraft fees?
We’ve all learned this lesson before. Forget about pending transactions or thinking that our card will just decline if there’s insufficient funds for the transaction to go through. Unfortunately, we were met with overdraft fees. The number one tip is to stay mindful of your account balance, download your banks app and avoid overspending.

Enroll yourself into overdraft protection – you can make the decision to pull money out of your savings or credit card to cover your purchase. There’ll be a small fee, but it’s better than the larger overdraft fee. The majority of complaints against banks with the BBB are overdraft fee related, It’s time that we bring more awareness to fees that can cripple you.

TIP: Many times you can call into your bank and ask to have the fees removed. Most Banking Institutions will do this a few times as a gesture of good will.