Logging onto your online bank statement or opening your paper statement and seeing one or more overdraft charges appear on your account can be a very frustrating experience. Each charge can cost up to $35, depending upon the bank. You know that bank fees situation has gotten bad for you if you are afraid to check your statement for fear of seeing yet another charge.
If this describes you, rest assured you are not alone. Your fellow citizens are collectively spoon-feeding banks a whopping $30 billion per year in overdraft fees. Banks have come to depend upon these fees as a source of healthy annual profits.
In fact, the high levels of profitability of so-called overdraft protection programs has a lot of consumer advocacy groups and members of Congress up in arms. Part of the problem is that many banks have admitted to the practice of “transaction stacking.” This is whereby banks carry out transaction processing to produce overdraft charges.
Transaction stacking works like this. Say, for example, that one day you wake up and, seeing that your checking account balance has dwindled to just $30, you decide to just do some very light shopping. So, you go out and make three debit card charges on a given day: one for $5, one for $7, and another for $50 in that order. (You obviously had forgotten how low your balance was once you left the house).
Your bank, practicing transaction stacking, decides to process the $50 charge FIRST even though it was made last among the three. Then, they process the $5 and the $7 charges. That $50 charge immediately sent your balance into the red, making you eligible to pay fees. Due to the order in which they processed the transactions, you end up incurring three overdraft charges at $105 instead of just one charge at $35. Sneaky bank!