Smart SpendingSmart Spending

Your most costly banking mistake

If you've opted in to get costly overdraft protection, you might want to rethink that decision.

By MSN Money Partner Sep 28, 2012 10:14AM

This post comes from Matt Brownell at partner site logoThere's nothing more expensive than spending money you don't have. That, of course, is a lesson you might learn the hard way if you carry a balance on a high-interest credit card. But spending beyond your means can be a pricey proposition even with a debit card. has released its annual checking survey, assessing the fees charged for various services associated with checking accounts.

Perhaps the most notable finding was that only 39% of banks offer totally free checking with no minimum balance requirements, down from 45% in 2011. (With that said, customers have become adept at finding ways to get their checking services for free, with 59% of Americans recently reporting that they pay nothing for their checking account.)


Bank sign © John Foxx, Stockbyte, Getty ImagesBut in addition to those findings, the checking account survey contained a good reminder to banking customers: The costliest thing you can do with your checking account is to overdraft your account while signed up for overdraft protection.


Sure, your wallet can suffer death by a thousand cuts if you are charged monthly maintenance fees (which average $5.48 a month, up 25% over last year, according to Bankrate) or use out-of-network ATMs ($2.50 to the ATM owner and $1.57 to your own bank, on average). But the biggest single fee remains the dreaded insufficient funds (NSF) fee, which now averages $31.26.


A new study (.pdf file) by Moebs Services found that bank revenue from overdraft fees increased 2.1% to $31.5 billion for the year ending June 30, up from $30.8 billion the previous year. The $700 million bump came from a 3.6% increase in price and a 1.4% decrease in the number of overdrafts.


The category of fee includes both bounced checks and overdraft protection on your debit card, but the take-away is the same: If you try to spend money you don't have, your already meager balance will get hit hard. At Bank of America, for instance, bouncing a check or requiring the use of overdraft protection will each cost you $35.

The good news is that you have to opt in to get the costly overdraft protection service (unless it's a store credit card), so if you're charged such a fee it's because you chose the sting of the fee over the embarrassment of having your debit card turned down.


Still, with consumers expressing confusion over their bank's fee structures and banks ordering transactions in such a way as to maximize their collection of such fees, people continue to get hit with the mother of all fees.


More on and MSN Money:

Sep 28, 2012 1:18PM
Sep 28, 2012 2:13PM
I am not sure why you would overdraft your bank account in the first place?  If your not on top of your finances you have no one to blame but yourself.  Its not hard to log on to your account every once in a while to check you balance.
Sep 28, 2012 2:47PM
Two comments: (1) not mentioned are the bounced check fees, and/or, bad credit notices from the stores that are imposed when they have to get their money. What do they cost you in comparison to the bank fees? (2) I am no fan of banks, but how are they greedy? Services regardless of who provides them come with fees. It costs them money to essentially float you a loan. If you don't have the money don't spend it. If you don't have it and spend it don't expect that it will be free.
Sep 28, 2012 4:17PM
This is the Bank of America way of doing business......give the customer a checking account along with a debit card.......if a customer has a $200 balance and makes a $150 debit POS purchase at 1pm they have a $50 balance left..$20 purchase at 3pm leaves $30 balance $15 purchase at 3:20pm leaves $15 balance. Bank closes at 4pm. $15.07 purchase at 4:15 pm overdraws the account by a whopping .07cents. Transactions updated electronically at 9pm. Transactions update in order of amount by processing the largest one first so instead of having ONE $35 overdraft fee your balance is shown to be - .07cents so now you get charged $35 for each of your six transactions for a whopping total of $210 dollars because you overdrew your account by .07 cents on you last transaction of the day even though the time of these transaction was transmitted to the bank when you made them. the Bank will tell you that there is nothing they can do to prevent this and that you must pay the overdraft fees....Recently a class action lawsuit was brought against BOA for this procedure and rather than admitting doing anything wrong and letting it go to trial BOA paid out 440 MILLION to settle without admitting any wrongdoing (just a MISTAKE on their part) The bad news is they still process transactions in the same manner....I know. I look at my bank statements every day on-line and while I do NOT overdraw my account, the transactions are still processed in order from largest first to smallest with no regard to the time they were made (at the Point Of Sale = POS) ........MOST FRAUDULENT BANK IN US HISTORY. Other large banks follow this protocal also...check your account on-line to see if yours does might be surprised!!!!
Sep 28, 2012 4:09PM
If everyone walked away from banks and went to credit unions, that would solve their fee problem.  I don't know why anyone would bank at a regular bank.  When we had the financial metdown in 2008, the govt should have let the banks fail, people could have collected their money from the FDIC and put it into a credit union.
Sep 28, 2012 3:35PM
Everybody hates overdraft fees...but they're your own fault for being too lazy.

Keep the checkbook register current.  Don't guesstimate that you have enough money in there.

Sep 28, 2012 2:42PM
If people would learn to manage their money then this would not even be a problem.  People complain about this, but they forget about what companies charge for bounced checks...... or possibly going to court for hot checks.  Don't hate on the bank because they figured out a way to make the money instead of the courts or businesses.  This is nothing new.....just a different person charging you.
Sep 28, 2012 2:12PM
My wife works for a bank in the mortgage department and you people have no clue how bad the banks are screwing you over with bogus fees they add on and you pay intrest on for the life of your loan and they milk you to death and you dont even know it...
Sep 28, 2012 2:23PM
The only fowl play with the banks is accepting purchases when the cusotmer doesn't have the funds.  They should be rejected altogether.  Also when they put the larger payment in front of the little ones even if it came after so they can collect more fees.  That should be illegal.  In the end, go to credit unions and don't overdraft.
How does it cost a bank $35 when somebody overdraws their account by $1?
Sep 28, 2012 3:20PM



You can't argue with this......if you have $100 in your account and write checks for $110, you have broken the law if you do it knowingly.


Now, everyone makes a 1+1=3 type mistake every now and then.  That is why I do the math twice and have a mini-calculator.  My account also reads -0- balance when I have $100 in it.....that's my overdraft protection.


Being a 'responsible for my own actions' kinda guy...I realize that the convenience of swiping a debit card comes with the responsibilty to track my balances.


I can empathise with what happens when mistakes are made.  I made a deposit at a teller.  She entered the wrong acct. #, and bounced 6 bill checks because I missed the mistake.  EVERYBODY piles on bounced check fees!!!!  If I remember, I accumulated about $400 in fees and a $100 penalty for the IRS check!


Fortunately,,,B of A covered all the fees and the penalty...and wrote an apology letter..I thought that was nice since I was at least partially responsible for missing the mistake, too.


As sure as I'm sitting here, a lot of people out there look at "overdraft protection" as a loan based on future's called living beyond your means.


I wish the bozos in the video and author of the article would listen to Suzy Orman rather than telling the masses it is the bank's fault customers aren't responsible and don't research the REAL costs of bank services.


Everyone bitches about fees for services.....DON'T USE THE SERVICE.

Sep 28, 2012 4:33PM

It is obvious that A LOT of people could use training in finances.   Necessity...mother of invention.


My heart aches for the posters who are obviously struggling and trying to do their best.

Then I read posts which demonstrate the poster sees him/herself as a victim with no responsibility for their own actions.


The resources for learning prudent financial behavior are all over the requires commitment and discipline...which seem to be in short supply...that's what makes it hard.


If I can do it,  Y'all can.  I so wish I could come up with a pill that would give people the drive to see opportunities and succeed, rather than stumble over roadblocks and give up.


I grew up in a family of 10.  My father was a govt. worker making $5,800 per year up to $13,000 when I turned 18.  Mom stayed at home (obviously).  They both grew up in the depression and sacrificed 5 years of life to WWII.  They taught me to work hard and persevere.  I began working at 8 years old.  By 16, had to pay taxes because Dad claimed me and I made enough to owe with no deductions.  I spent 20 years, retired from the military, worked part-time whenever possible.  Graduated from high scool 3.8GPA.  Graduated college 4.0 Summa Cum Laude...Completed all my college work IN THE MILITARY.


And you know what?  Life was NOT a back-breaking drag.  I loved every single minute (except when Mom made me eat liver).


Yes, today  I have a 7 figure net worth (millionaire)...and live within a budget.  My military retirement covers my monthly expenses.  I wear sweats or t-shirt, buejeans and tennis shoes 24-7.  I drive a 1994 Ford Ranger ( I love my AMERICAN truck.).  Don't want a new one, it is not fully depreciated.


I consider my relationships with people to be the most rewarding part of my life.  Most who know me have no clue about my worth...I like it that way.  Nothing is better than to be of service to other people.


I realize in this day and age, I'm kind of a "queer duck"  How'd ya' like my pic in drag?  Okay, Halloween costume alright?


Financial condition is a fact of life....not a state of mind.  Getting to a goal is pointless if you don't enjoy the journey.


I like to see the best in people.....even Republicans!  :)

Sep 28, 2012 1:41PM

Why don't we address the REAL problem?


Wages for 60+% of American households are going down, and people can't cut their expenses fast enough when unexpected life happens. It's even worse when a person's pay is commission based.

Car repairs

Home repairs

Medical bills

Just to name a few of life's unexpected moments.

Not to mention the previous credit limits have been squeezed to a fraction of what they used to be.


The Media likes to talk and complain about high tax rates, but fees are a MUCH larger problem for a majority of American families. The Government isn't "fleecing" America, private, under regulated companies are. We should be watching the money changers, not the tax man.

Sep 28, 2012 3:17PM
If your Bank charges you stupid fees, then change banks.  I do not do business with ANY National Bank.  I utilize local banks, and they never charge fees, and actually act as if they appreciate my business. BOA, SunTrust, Well Fargo, Citi, Chase...forget them.  Your local Banks actually want your business
Sep 28, 2012 4:07PM

There is another option: move your money

a credit union, community bank or online bank – that offers totally free checking with no requirements to qualify. Bankrate found that 72 percent of the largest credit unions still offer free checking.

Sep 28, 2012 2:08PM

So what do you call the government who has mismanaged america's money to the tune of 3 trillion dollar deficit.  If that's not poor money managment and a bad example of how to manage money, I don't know what is!


So stop preaching to everyday people, MSN morons, preach to the politicians!

Sep 28, 2012 1:47PM

To the Public:


Just take a look at the tricks the Banks are using....First..  Make Payroll Checks obsolete so Joe Public must have a bank account..  Second..  Make excuses to hold money in accounts to make Joe Public overdraft their account...  Third ....  Use the Law to drain any account that does not stay active to remove all options to Joe Public...  Banks Win   Joe Public Loses....

Sep 28, 2012 2:09PM
First off check your balances. Beware about paying bills before the due date by check or debit cards, sometimes that transaction takes several days to post to an account. You could think you have what you don't have in your account. Some of my accounts when I pay, they post and it shows on my account which help me not to over draft. I like my money!!!

Sep 28, 2012 3:23PM
when it comes to money somebody always trying to get more of it .... legal or illegal . chnsht or fair ... hope about half the banks go broke starting with wells cargo
Sep 28, 2012 4:49PM
banks insurance companies oil they give workin ppl the shaft cause bankers give politicians millions and get back billions
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.