Personal banking is one of those things we do that we would prefer to just run itself, as if on auto-pilot. We feel we should not have to be always looking over our shoulder to see whether our bank is playing it straight with us or whether we need to constantly keep watch in order to keep them honest.

Unfortunately, banking life is not that simple. Reason: banks are always trying to find ways to squeeze more profits out of their customers.

If you take the perspective of a bank, you cannot blame them. After all, banks have the right to make money according to the rules of a capitalistic system. And, banks have an incentive to make money, given all of the competition they face. So, why shouldn’t they try?

How Banks Make Their Money

Essentially, banks make money in three ways: from investments, loan interest, and fees. Banks invest the money deposited by their personal banking and business banking customers into ventures that they believe will turn a profit. They also extend loans to businesses and individuals – charging an interest rate for doing so. And, then there are the bank fees.

Bank fees are no small part of banks’ income. In fact, banks in the U.S. alone make well over $30 billion in fees annually. There are a number of types of bank fees, including checking account fees, service fees and overdraft fees.

The Role of Auto Drafts Scams & Overdraft Fees

Given their profitable nature, overdraft fees are a particularly lucrative way for banks to make their money. Basically, an overdraft fee is charged every time a customer tries to write a check, make an online payment, or make  debit or credit charge against an account that has an insufficient balance to cover the charge.

One situation whereby overdrafts can occur is when an auto draft has been set up, taking money out of a bank customer’s checking account each month for the purposes of paying a certain merchant or other service provider. Some bank customers suspect their bank is intentionally manipulating the exact date of the auto draft based upon account balance. The goal would be to increase the chances of an overdraft – resulting in more fees for the bank.

While it is difficult to prove this is going on, it is entirely possible, and there is precedent for this type of deceptive behavior on the part of banks. For example, some banks have admitted to practicing what is termed “transaction stacking,” which means processing pending transactions for a given checking account in the order of highest-to-lowest charge. The goal, again, is to increase the chances of more overdraft fees being incurred.

3 Ways to Avoid Auto Draft Scams

Here are 3 ways to avoid auto draft scams:

1. Always keep at least $100 in your account: One way to avoid your bank’s manipulation of auto drafts just to earn more bank fees is to always keep a padding of $100 to $200 in your account at all times. (Of course, this solution will not help you if the auto draft amount is higher than this.)

2. Check your account balance at least twice per day: Another solution is to spend more time monitoring your account balance, your already-cashed vs. not-yet-cashed checks, and any pending bills or credit card charges. This takes more of your time than you probably want to spend, but at least it will help you stay on top of things.

3. Switch to a no-overdraft-fee bank: Some banks are now instituting no-overdraft-fee policies. These banks will never charge you an overdraft fee – even if you overdraw your account. Consider switching to one of these banks in order to avoid these overdraft problems altogether.

Auto draft scams are just another way for some unscrupulous banks to earn more money off of you and your account. Take action in one or more of these 3 ways in order avoid these scams.

Even when having one of the best of days, there are certain little things that can just put a damper on your joy. Some things in this category that come immediately to mind include: finding a soggy newspaper on your porch that wasn’t properly wrapped in plastic, realizing that you are all out of coffee or milk at breakfast time, or being stuck driving behind a super-slow dump truck that is tossing little bits of trash right at your windshield. Come on, admit it: you’ve been there, too!

But, here is one that has become not just an occasional annoyance but a downright nuisance for many, many people: outrageous bank fees. And one of the most common type of bank fees these days is the overdraft fee. This is the fee you pay when you make a charge against your account that exceeds the amount in your account at the time.

Overdraft fees are a particularly frustrating type of bank fee because they can seem to sneak up on you, even when you feel you are being careful about your spending habits. Overdraft fees would be bearable if it were not for the fact that they are costly (up to $35 in the case of many national banks) and that they happen too frequently (in many cases, several times per month).

If you agree that bank fees are more outrageous than ever, turn your anger into power! Here is some useful information about overdraft fees and what to do about them.

Why They’ve Gotten Worse

Bank fees such as overdraft fees are getting more and more attention in the media in recent years due three major trends:

1. Confusing online bank statements: You may have noticed that your online bank statement is not as easy to understand as you might like. Banks can do tricky things to make statements hard to read (too many to explain here). The result is that, in essence, the current balance you see may not be what is actually in the account and available to you right now. Translation: it’s easy to make an extra charge on the card because you believe there is more money in the account than there actually is.
2. Overdraft protection programs: These programs cover your “bad checks” and debit card charges that bring your account over the limit, but then they charge you a hefty fee for the service.
3. Debit cards: Debit cards, when connected to an overdraft protection checking account, can be charged even when your account balance is zero. That means you can do a day of shopping, come home, and realize you just made 3 or 4 purchases with your debit card – even though your balance was already at zero. The fact that your bank didn’t reject the charge when you were at the merchant’s store or restaurant tells you what the bank’s motive is: to make more profits in the form of overdraft fees.

Make no mistake: banks are profiting from these trends (to the tune of $26 billion per year in overdraft fees alone), so do not be surprised if they are in no hurry to fix the status quo.

How to Fight The Fees

You can protest overdraft fees, although winning the battle is not easy. If you do try to contest a recent fee, be sure to get your facts straight before your call. And, be polite: you catch more flies with honey than with vinegar!

What To Do If You Don’t Want to Fight Anymore

Most of us are just too busy to want to fight with our banks: after all, our time is valuable. If this describes you, instead of fighting your bank, just quit them. You can find banks that do not charge overdraft fees, even when you overdraw your account. There are not many of these banks, but they are definitely out there. And, they are worth looking for, especially if you believe that bank fees are more outrageous than ever.

Banks provide us with a very useful service. In the very simplest terms, a bank offers us a safe place to keep and organize our money – and in some cases even let us earn interest on that money. Pretty good deal. But there is a catch, of course: bank fees.

Bank fees are one of the two main ways banks make money. (The other way is by lending out our money to others at a profit). So, it makes sense that banks should charge some fees in order for them to stay in business.

However, sometime during the past couple of decades, bank fees somehow went from being an extra income source for banks to becoming a primary income source. One of the biggest sources of fee-based income for banks is that of overdraft fees. In fact, banks bring in about $30 billion per in overdraft fees in the U.S. alone. That’s pretty big business.

As consumers, it is important that we keep ourselves educated about banking and overdraft rules so that we can avoid paying overdraft fees whenever possible.

Here are 5 points about banking and overdraft rules you should know:

1. Most banks have overdraft protection programs in place. These programs cover charges made to debit cards, credit cards and checks even when the account has a negative balance. They also allow the bank to charge an overdraft fee for this service.

2. The majority of banks with overdraft protection programs automatically enroll new customers in these programs upon new checking account sign-up – often without making it very clear to the new customer exactly how it works.

3. Customers who are enrolled in overdraft protection programs are usually not aware that their bank will approve debit charges made at a merchant even when the account has a negative balance. This can result in the customer paying $100 or more in a single day in overdraft fees.

4. For most banks, there is no limit to the number of overdraft charges you could pay in a single day.

5. A few banks now offer no-overdraft-fee checking, which means they will cover charges to negative-balance accounts – but will still not charge you an overdraft fee.

Keep these rules in mind in order to keep the bank fees you pay to a minimum.

Modern banks have their roots in Western Europe. In the old coffeehouses of London of the 16th century, loosely-organized moneychangers did business with patrons. This went on until the London Royal Exchange was founded in 1565. Soon after, in the early 17th century, the center of trade (and therefore banking) moved to the Netherlands and evolved into what we know as banking today.

Things have evolved quite a bit since those early days of banking. In the modern age, banks have come to represent something solid and dependable – institutions upon which the customer can depend. This is definitely the image that most banks’ marketing staffs and architects want you to perceive. It is for this reason that most banks – especially their headquarter offices – are located in imposing-looking structures made of marble or steel, while others are housed sky scrapers built to impress.

Indeed, banks have every interest in the public viewing them as dependable, reliable places to put one’s money. That is why a recently-introduced practice called “transaction stacking” is causing such a stir among consumer advocates. This is a deliberate method that banks engage in to increase your chances of incurring overdraft fees to your account, which means more profits in banks fees for the banks.

Here’s how it works: say you have $50 in your checking account. On that day, you make several debit charges, in this order: $2 for a pack of gum, $5 for a cup of coffee, $8 for some office supplies, and $45 at the service station. If your bank processed these transactions in order, you would have to pay a single overdraft fee ($35, in the case of many banks). But, with transaction stacking in play, your bank will purposefully process the transactions from largest to smallest, which means you would pay three overdraft fees (for the gum, coffee and office supplies purchases). That’s $105 in charges vs. $35 if they hadn’t engaged in this deceptive practice.

According to a 2008 Consumer Federation of America survey, most major, household-name banks are manipulating transactions in this way. Of course, the banks claim that the reason they do this is to prioritize larger transactions like mortgages that, if rejected, might jeopardize the customer. However, many consumer advocates believe that banks are manipulating transactions for overdraft fees.

If you believe your bank is doing this, here are some things you can do:

1. Keep an extra padding of at least $100 in your account at all times:
   This is probably the most failsafe way of avoiding overdraft fees due to transaction stacking. But, it’s not easy for everyone to maintain, given the unpredictability of life.
2. Link a backup savings account to your checking account for overdraft protection:
   Most banks offer savings accounts or secondary checking accounts that can act as reserves of sorts. When you overdraw your primary account, your bank can transfer money automatically into your primary checking account.
3. Watch your transactions more carefully:
   This one sounds obvious, but it is also true: if you have the time, check your account balance twice per day. Within online access, this is easy. Remember: your posted balance is not always your final balance, since it may not yet reflected checks that already show as being “paid.” This is confusing and could throw off your calculations – so you will need to pay close attention.
4. Switch to a bank that does not charge for overdraft fees:
   By far the simplest solution is to switch to a bank that does not charge overdraft fees. There are few, but a growing number, of banks who will actually cover your charges even if you overdraw your account. But, even then they will NOT charge you an overdraft fee. Switching banks may sound like a pain, but doing so could save you hundreds per year in fees.

Educating yourself about how banks really operate “behind the scenes” can help you to manage your expenses and income in a smarter way, reducing the fees you pay each month.

Paying outrageous bank fees on a monthly basis has become an unpleasant fact for many consumers. Even people who manage their money carefully can end up paying at least 1 -2 overdraft fees per month, easily running up a few hundred dollars in charges every few months.

The charging of overdraft fees is big business. Large banks have devised what some people believe are sneaky ways to get customers to pay the fees. For example, banks are known to actually re-arrange the order in which purchases made on the same day are processed: by processing the larger purchases first, an account can become overdrawn more easily, after which time multiple smaller purchases are processed – thereby over-drawing the account and incurring $35, $70, $105 or more in fees on that day alone.

Another trick: banks will automatically enroll customers in “overdraft protection” programs. Given their name, these programs sound at first like a safe haven for people who occasionally overdraft their accounts. In reality, these programs are merely an excuse for the bank to pay for an overdraft and then turn around and immediately charge a high fee to the customer each time this occurs.

Even though consumers have become increasingly aware of and concerned about the overdraft situation, there has historically been nowhere to run and nowhere to hide – short of hiding one’s money under a mattress. Why? Because almost all of the big banks are doing it.

Fortunately, there are a handful of national banks that do not charge overdraft fees at all. Here are 3 things for when searching for banks without overdraft fees:

1. Make sure the bank has an online sign-up option. Here is one that does: http://www.escape-overdraft-fees.com/.
2. Select a bank that is FDIC-insured.
3. Make sure your bank allows you to conduct online banking, including the ability to make balance transfers and check balances online.

Banks that do not charge overdraft-type fees are still rare, but they are out there and open for business. Most banks prefer to continue to make huge money off of their customers in the form of overdraft fees. It’s worth making the effort to find a bank that refuses to charge overdraft fees of any sort.

There is a little myth about banking that we all carry around in our heads. It goes something like this: if you are careful, take your time, and pay close attention, you will never overdraw your checking account, thereby incurring NSF (non-sufficient fund) fees.

If you have ever complained to someone you know about having been charged an NSF fee on your bank statement, you will hear their version of this myth or see it in their eyes. The person, who may care a lot about you, will still be a bit condescending. It’s like they are thinking, “Well, personally, I am very careful about how I conduct my banking, so I almost never get charged an overdraft fee.”

Unfortunately, this is just that: a myth. That is because, even the most careful, upstanding “banking citizens” among us can be known to incur an NSF (or overdraft) fee now and then.

Reasons It Is So Easy To Incur An NSF Fee

There are multiple reasons why it is so easy to get non-sufficient funds charges on your account, including:

1. Online bank statements that show your current balance can be misleading. For example, many leading banks show two balanced: posted and available. And, sometimes your current balance actually does not reflected un-cashed checks – even those that show as having been “paid” in your online bill paying area.
2. Expenses and income can be unpredictable. Even if you have a steady paycheck or other income source, it can be difficult to predict your expenses each month. Even the best budgeters amongst us can miss things.
3. Debit card charges will be cleared by your bank – even if your balance is zero. Debit cards are set up to clear pending charges, even on a zero-balance account. That means you could make 5 charges on an empty account in one day and your bank will allow the purchase each time – and allow the fees to pile up.

The Solution: A Checking Account With No NSF Fees

The best way to avoid NSF fees is to switch to a bank that does not charge them. While about 80%-90% of banks do charge overdraft fees, some do not. These banks will never charge you an overdraft fee – even if you overdraw your account.

How To Find A No-NSF Fees Bank

Here are the steps to follow:

1. Make a list of at least 5 no-overdraft-fee banks.
2. Cross off of your list any that are not FDIC-insured.
3. Remove any that do not offer you access to nationwide ATMs.

Finally, before applying, scan the bank’s website to make sure you understand the terms and conditions to make sure you are comfortable with them. Then, apply!

Having a checking account is a necessary requirement for anyone who wants to live a normal life in this shopping-oriented society of ours. Who doesn’t think that life would be a bit easier with a checking account? After all, with an account, you have the ability to write checks and to use a debit and credit card linked to your account. You can also gain access to a nationwide network of ATM machines, giving you access to your cash no matter where you go.

One reason that some people put off opening a checking account is that they are concerned about having a check or debit card transaction bounce. And, this concern is justified. After all, overdraft fees are a big business for banks. In 2006, banks earned over $25 billion in overdraft fees in the U.S. alone.

People looking to open a new bank account often look for checking accounts with bounce protection. These accounts have overdraft protection programs in place. Here is how overdraft protection programs work:

1. The customer has a certain amount in the checking account, say $100.
2. The customer does his or her best to not make any charges against the account that are larger than this current balance amount.
3. One day, however, the customer misjudges the current balance and makes three charges against the account: one for $45, one for $60, and one for $5.
4. The first charge of $45 is fine, but the $60 charge puts the account into a negative balance, and the $5 charge also hits the account when it is “in the red.” The result: the bank covers all three of the charges, due to the fact that the overdraft protection program is in place for this customer. This is an advantage on the one hand, because it means that the vendors to whom the customer promised the payments will get paid on time.
5. However, given that the bank honored the two charges that caused the account to have a negative balance, the bank also charges the customer an overdraft fee. This fee can range, but is usually in the $25 to $35 range per charge. If the fee is $35, in the example above, the customer would have to pay ($35 x 2 =) $70 in overdraft fees!

As we can see, checking accounts with bounce protection have their pluses and minuses. Is bounce protection a good thing? Yes, they are good in that they cover outstanding charges. But, the fact that they charge such high fees makes them very expensive.

The very best checking accounts are those that offer bounce protection but do not charge a fee. Yes, surprisingly, there are banks that offer bounce (overdraft) protection without charging a fee. These banks charge a low monthly fee which is far less than what the average person pays in overdraft fees per month.

A final note: have you been rejected recently for a new checking account? Your name may have been reported by a bank to something called Chex Systems, a service that banks use to evaluate credit risk levels for prospective checking account holders. Fortunately, some banks now offer second chance checking accounts. These banks promise to never refer to Chex Systems when making decisions on a new account holder, increasing the likelihood of acceptance. For more on this option, check out: http://www.squidoo.com/open-second-chance-checking-account-online.

An overdraft is what occurs when the total amount of the charges you make against your account exceeds the current account balance, causing the account to go into a negative balance (a.k.a., to go “into the red.”).

In the case of most banks today, customers are enrolled in courtesy overdraft protection programs that “protect” them from any pending debit, credit or check payment from being denied due to their having insufficient funds in the account.

The shadow side of these overdraft protection programs, of course, is the huge fees associated with these courtesy services. Even a $5 overdraft can result in the account holder paying an overdraft fee of $25 or more for EACH transaction that is made after the account is overdrawn. These can get expensive for consumers: just two overdrafts can cost a customer $50 to $70 in a single day! These fees can really add up over the course of a month.

Overdraft fees are big business for U.S. banks. Together, they raked in over $25 billion in overdraft fees last year alone. This is a lucrative business model and they want to do everything they can to keep the gravy train moving.

Since courtesy overdraft protection programs were introduced by banks around a decade ago, most financial institutions have increased participation rates by their customers to nearly 100%. How have they done so? By making the programs opt-out.

An opt-out program means that an applicant is automatically enrolled without being given the opportunity to opt in, or to actively choose their participation. In the case of an opt-out program, a person must specifically indicate that they do NOT want to participate in it. Without such an indication, the person is automatically enrolled – often without their knowledge or awareness.

Many customers have come to find overdraft protection programs as being very hard on their pocketbooks and have wanted to opt out of them completely. These people would rather have a pending debit or credit transaction denied at the point of purchase if their current balance will not support it than have to pay exorbitant fees to their bank.

Unfortunately, many banks make the option for courtesy overdraft protection opt out fairly difficult to attain. They require a customer to meet certain conditions if they are to get themselves out of the program.

If you want to opt out of your bank’s program but don’t know how, here are some guidelines:

1. Locate and read your account terms and conditions. You should be able to find a copy online or with your original application papers. Find out whether you meet the conditions.
2. If you cannot find the terms and conditions paperwork, contact a representative and inquire about their opt-out policy. This will differ greatly depending upon the institution.

Even if you are allowed to opt out of the program, you may be debating whether this is a good idea. After all, who wants to face the embarrassment of having a pending charge denied while at the supermarket, coffee shop or clothing store? Better to just keep paying the fees, right? Not necessarily.

An alternative to opting out is to find a bank that will never charge you an overdraft fee – even if you overdraw your account. They do exist and they are looking for new customers. In the case of these non-overdraft-fee banks, they will honor a pending charge not covered by your current balance but will not charge you an overdraft fee for doing so – ever. This can be an ideal alternative to staying with your current bank if you are dissatisfied with their overdraft policy.

If you were a parched traveler in the middle of a hot desert looking for water, you can imagine what a welcome sight a lush oasis spotted in your path just up ahead would be. That is exactly how jaded bank customers who have been paying too much money in overdraft fees to their bank each month feel when they find a no-overdraft-fee bank: a sense of pure relief.

Why We Pay Too Much in Overdraft Fees

Banks bring in over $25 billion each year in overdraft fees alone. That is “billion” with a “b.” Guess who is footing the bill? Average citizens just trying to scrape enough money together each month to pay bills and get by, that’s who. If asked, most people would agree that they do not feel they need to help banks out financially in this way. (Banks are already getting plenty of help as it is).

But, what exactly brought us to the situation with overdraft fees that we find ourselves in now? How is it that banks can be making such a killing in fees? The answer lies in the relatively recent rise in two related banking phenomena: overdraft protection programs and the debit card.

Overdraft Protection Programs Are Not Your Friend

Overdraft protection programs certainly sound friendly enough. When they were introduced about a decade ago, most consumers took them for what the name implies: a way for the bank customer to be protected from checks and other charges “bouncing” due to insufficient funds in the accounts. And, in a way, this understanding is accurate: these programs do indeed protect bank customers from having their checks bounce or debit card transactions rejected.

However, that’s where the “protection” ends. You see, even though your bank will cover those charges for you, they will also turn right around and charge you an overdraft fee for the trouble. These fees usually range from $25 to $35 or more. That means that just three overdrafts in a month can cost you over $100!

Debit Cards Make Things Worse

What really has made the whole situation more difficult is the rise of the debit card. Debit cards that are attached to a checking account are so convenient to use. After all, it is so easy to make a charge on your debit card for the goods and services you need. But here is the catch that most consumers don’t know about: your debit card transaction will be honored by your bank, even if you do not have sufficient funds to cover it.

Now, this sounds like your bank is doing you a favor, but remember, when you have overdraft protection in place, the result is – ding – yet another charge to your account. These can really add up fast, putting you more in the hole. The whole situation is set up to basically invite more overdraft charges into your life.

How to Find a Bank with No Overdraft Fees

If you want to find a bank with no overdraft fees, check out these tips:

1. If you live in the U.S., make sure that the bank is FDIC-insured. This means that, even if they were to go under, your funds would still be safe.
2. Choose a no-overdraft-fee bank that allows you to sign up online.
3. Make sure the bank gives you access to a nationwide ATM network so you have ready access to your cash.

Once you find your no overdraft fee bank, you will be glad that you made the switch. The monthly savings will be noticeable right away, since you will never have to pay an overdraft fee again!

“Another overdraft fee on my statement?!” The words echo across the house/office/coffee shop/airport lounge. “How could they do this to me?” Familiar words, aren’t they?

Of course, a purist will tell you that any overdraft fees that a banking customer has to pay is strictly their own fault. And, in a way that is true. However, it is an unarguable fact that since the widespread adoption of overdraft protection programs less than a decade ago, consumers on the whole are paying more in bank fees than they ever have. While most checking accounts are now “free,” the actual cost of having a checking account runs into the hundreds of dollars annually for many, many bank customers.

In fact, banks earn about $25 billion in overdraft fees annually in the U.S. alone! The overdraft protection program game is an extremely lucrative one for banks, and they want to keep you in that game.

Fortunately, there are now a handful of banks coming onto the scene that do not charge fees – even if you overdraft your account. Here’s how it works:

1. You apply and get accepted for your new checking account. Some accounts involve a small monthly checking fee, but you will save money overall by paying a small, regular fee to their bank each month rather than unpredictable and painful overdraft fees. No surprises!
2. If you write a check or make a debit/credit charge that exceeds the amount still in your checking account, the bank will cover your payment – just like with a regular overdraft protection account.
3. HOWEVER, the bank will NOT charge you an overdraft fee for doing so. (Wow – that’s refreshing). There’s no limit to the number of overdrafts you can make, either. You just have to make sure that total overdraft amount at any one time does not exceed a certain, pre-determined figure.

If you want to find a bank with no overdraft fees, here are some tips:

1. Make sure that the bank is FDIC-insured. This means that, if your bank were to shut down and close its doors for any reason, you can still get your deposit amount back.
2. Find a bank that allows you to conduct banking transactions online. This means your having the ability to login and check your balance, make transfers, and pay your bills from the comfort of your home or office.
3. Make sure that the bank you select gives you access to a national ATM network. It’s important that you are able to get your hands on your cash whenever you need it.

Overdrafts are a reality for many people these days, and they are costing consumers collectively billions of dollars each year. There is no reason why anyone should have to pay these fees when there are banks that do not charge overdraft fees – even when an overdraft occurs. Once you gain access to a list of no overdraft fee banks, make sure you select one that meets the criteria outlined above to ensure the best banking experience possible.