Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Old 05-22-2010, 04:35 PM   #21
Gumby's Avatar
Join Date: Apr 2006
Posts: 10,656
Originally Posted by Katsmeow View Post
My son (who is a foolish 18 year old) got hit with huge overdraft fees that spiraled out of control out of a very small initial overdraft. The first overdraft they charged I think a $10 fee and transferred the money from savings. Bear in mind that he didn't realize he had overdrawn. They send a notice in the mail but it has taken up to 3 weeks to arrive. In the meantime he didn't know the transfer had been made from savings or that the fee had been charged so he quickly got in a situation of repeated overdraws of very small amounts. He didn't have much in savings so that was quickly emptied and then the fees increased to a higher amount. Long story short he ended up with several hundred dollars in overdraft fees.

Yes, he was an idiot. He would call the bank and use their automated service to see what the balance was in the account. He didn't realize there were transactions that hadn't cleared so he used the debit card and went negative. Yes, I told him to keep a written record of withdrawals but he figured he knew more than I did and that transactions should instantly clear so the bank feedback was 100% accurate.

I'm sure that most people with overdraft protection who are here are not so idiotic. That said, I was shocked by how high the fees spiraled up to from an initial overdraft that was very small with the fees just eating away the savings account balance that he had thought was covering overdrafts.

In his case, not only does he not have overdraft protection he made it where his debit card is solely an ATM card.

Bear in mind that the reason for the new law is the fact that banks loved signing people up for this without getting their consent (often with no way to opt out) and then charging fees. The banks frankly prefer that people overdraw rather than simply decline the transaction.
A story very similar to your son's

Checking account overdraft fees: Bank robbery 2010 style - Connecticut Post

Living an analog life in the Digital Age.
Gumby is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-22-2010, 06:21 PM   #22
Recycles dryer sheets
Join Date: Sep 2009
Posts: 353
Thanks everyone for responses. I see how overdraft would be a problem with debit card usage. I think the main disadvantage highlighted by many responses occurs when
(a) without the protection, you *would* have seen that something did not go through (e.g. with debit card), but protection "hides" it from you, and
(b) account is used often, or one does not pay attention frequently enough that they don't see the fee hit the account until it's too late.

I think these are good points to keep in mind. In my particular case, the account I am thinking of does not have above two problems. It does not have debit card and is only used for periodic payment of ~3 bills / month. I also check for any weird activity on every monthly statement. So, hopefully, I would see the OD fee on the monthly statement. Finally, with direct deposit going into this account, even if I missed the OD fee hit on a statement, next direct deposit should cover incoming bills.

Given this, I think OD protection would be beneficial in my case since without it I think I would get hit with 2 fees (one for each side) for every online payment that is overdrawn and I would not know about it until I get the next statement either way. With OD protection, my bills would get paid on time and presumably I would get hit only by 1 side with fees instead of 2... Sounds about right?

smjsl is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Anybody fully understand overdraft policies ? Delawaredave5 FIRE and Money 34 03-10-2010 10:18 AM
eBay Downside? Midpack Other topics 39 01-23-2009 03:57 PM
Is there a downside for being denied Beststash Health and Early Retirement 4 10-21-2007 09:30 PM
Downside Protection BUM FIRE and Money 15 05-12-2007 05:45 AM
How much Downside Risk are you comfortable with? DFW_M5 FIRE and Money 19 07-31-2005 07:33 PM


All times are GMT -6. The time now is 12:38 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.