If you are the holder of a ‘fee free’ checking account listen up, you may be paying more in fees than you think, or for that matter have to.  I've heard people complain about banks for one reason or another for years, and I know that they have to make money some way.  However, after a recent overdraft in my personal account I became sickly aware of a policy that is sweeping banks everywhere, known as ‘overdraft privilege’.  If questioned banks deny it (I’ve spoken to 4), but the reality of it is simple.  Companies are marketing banks with software and instructions as to the how-to of earning interest free income from customers.  The logistics of it are simple: they tweak their software so that in the event a customer has an overdraft in their account the largest items are processed first in order to deplete the account the fastest resulting in the maximum amount of fees to the customer.  Also allowed is the ability to withdraw money from an account that is over drafted or does not have enough funds to cover the amount requested. 

With bank overdraft fees creeping towards or over $30 a pop this can result in some costly loans.  One report I read converted the fees to interest, and over the standard seven-day repayment of an overdraft the rate was well over 5000%.  Some banks stipulate that there are more fees if the overdraft continues for more than seven days.  (It would be cheaper to get a payday loan!)

I have to say that I didn’t request this privilege nor do I want it. I also didn’t intend to overdraw my account, but mistakes happen.  Let’s face it, most of the time no one intends to overdraw his or her account.   My bank told me that because it appeared my rent check was coming through they processed it first because it was more important.  Bull*$&#!  You cannot tell me that in a clearinghouse somewhere there are processors that analyze each transaction and check to see which looks more important if the account seems to be short.  My accounting mistake cost me $240 in fees, when if processed the old fashioned way (clear as much as you can first) it would have cost $70.  I would have even preferred that they send my rent check back to the landlord marked insufficient funds.  My landlord is a lot more understanding and it would have cost me a lot less if they had.

I am pursuing a complaint with the Federal Reserve and State Banking commission regarding this matter.  If you would like more information about this I would be more than happy to provide it to you.  Please email me for more information.  I believe that its time for us to take control of our money instead of handing it over to the banks that are supposed to be on our side.  I don’t need any help spending my money and I don’t think the bank deserves to get that much for a service I didn’t request.