I-Team: Banks cashing in on overdraft protection charges

I-Team: Banks cashing in on overdraft protection charges

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Conventional wisdom is that if you opt into your bank's overdraft protection plan, then you will save money.

But, I-Team's Dana Fowle recently saw a study that says that's not necessarily the case. And, don't worry, you aren't the first person to scratch your head over what you're about to read. But, a government watchdog group says it's very, very true.

Banks offer overdraft protection for ATM withdrawals and debit card purchases.  But, the Consumer Financial Protection Bureau says that safety net is expensive.

The group looked at bank overdraft protection plans and found them complex, confusing and loaded down with fees.  One example: If you have the protection, you can still get cash at the ATM when you're overdrawn.  But the bank will charge you- on average - $30 or more for the overdraft.

The study says it's a big moneymaker for the banks - accounting for 61 percent of charges on checking accounts for some banks.  If you don't have overdraft protection and your account is on empty and your account is on empty - well - you can't get money, but you also aren't charged a fee and you don't get yourself into debt.  

The study found there many ways banks tack-on charges when you dip into that overdraft protection.  So, the smart advice: Before you spend more money than you have, find out from your bank how much that convenience is going to cost you.  

The report reviewed a six-month period and found is customers were chronic overdrafters – and did not have overdraft protection for ATM or debit transactions – they saved $450 in insufficient fund costs.

More Info:
Consumer Financial Protection Bureau: Consumer Financial Protection Bureau launches inquiry into overdraft practices
Here's a look at a prototype penalty fee box

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