RICHMOND, VA (WWBT) - Be careful not to overdraft your bank account. Some banks are raising their overdraft fees. And that has some consumer advocates crying foul.
The Financial Times reports U.S. banks will make more than $38 billion just from overdraft fees this year. One debit card swipe too many, and you've overdrafted your bank account. Said Dana Wiggins with the Virginia Poverty Law Center, "It's a huge, huge issue for consumers."
Research firm Moebs Services says some banks are hiking overdraft fees. The average is $33.
Said Wiggins, "In many cases there are banks that allow multiple fees in one day. Let's say you don't know you have overdrafted your account and you go to buy groceries, then you go to get gas, then you go to do something else, it's just over and over."
Banks say the fees cover their risk of lending you the money. Said Bruce Whitehurst, President & CEO of the Virginia Bankers Association, "I think it's important to note that a lot of banks have not changed their fees in the last few years."
Some payday lenders believe it's not fair that a new state law limits their interest on short term loans, but there are no limits on bank overdraft fees for what they consider a similar short term loan. David Blankowski, regional manager for Cash-2-U Payday Loans, says it limits competition. "I don't think its fair to try to cap us, where we have to pack up and leave the state, which is only putting people in unemployment."
Adds Dana Wiggins with the Virginia Poverty Law Center, "It's like a payday loan with your checking account."
But the Virginia Bankers Association says there is no comparison. Said Whitehurst regarding banks, "It's not the core business model. With the vast majority of customers not over-drawing their accounts, it's really not even an appropriate comparison in my view."
Whitehurst says an American Bankers Association study shows consumers prefer that banks cover their overdrafts, "as opposed to a check being returned and dealing with a merchant fee as well."
The Financial Times reports that the Federal Reserve is working on rules for overdraft fees and the Obama Administration's proposed Consumer Protection Agency could also look at the issue.
Here are tips from the Virginia Bankers Association to avoid overdraft fees:
*Opt out, and ask your bank for overdraft protection linked to your savings or a credit line, which may have lower fees.
*Some banks offer email or online alerts when your balance is low.
*Use direct deposit.
*Keep a cushion of money in your account.
*Shop around for a bank with lower fees.