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According to the Center for Responsible Lending, Americans are getting hit harder than ever on overdraft fees. Their findings show that checking account holders pay more than $10.3 billion (and rising quickly) in overdraft fees every year. To give a sense of the impact to the checking account holders, overdraft fees for a debit card transaction are approximately $2.17 for each dollar “borrowed”, and the overdraft fees for a paper check purchase are approximately $.86 for each dollar “borrowed.”

It appears that as debit cards become more prevalent and paper checks go by the wayside, people are forgetting the fundamental skill of balancing their checkbook. Even with the myriad of tools available that allow you to check your balance instantly by phone, at an ATM, or online, many people are continually getting hit hard by these harsh fees. Is this laziness or cluelessness?

The banks themselves aren’t doing anything to mitigate these fees despite their ability to do so. You may have noticed on your bank statement that the bank often clears the transactions on your account from highest to lowest. Although this may seem to make sense, think of what this means to the checking account holder. Suppose you have $100 in your account and you make five transactions in one day for $5, $10, $15, $20, and $90. Banks will decrease your balance by $90 first, and then, starting with the $20 check which is cleared next, each additional clearing would trigger an overdraft fee. If the bank would have taken the charges in the reverse order, lowest to highest, only one overdraft fee would have been triggered.

That being said, it is still the checking account holder’s responsiblity to manage their spending to avoid these fees. Many banks will recommend you link your checking account to your savings account for overdraft protection. This may sound like a good idea, but if you have trouble running out of money in your checking account, there’s a good possibility you will deplete your savings account as well.

Instead, a good first step to protect against overdrafts would be to create a budget. Once you have established and are following a budget, keep track of your balances frequently. If your checking account provider allows for online account access, take five minutes a day to check your balance. If not, stop by an ATM or call your bank to get an updated balance. These small actions can lead to big savings on overdraft fees and peace of mind.

Read what Congress is doing to prevent abusive bank policies.

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