You probably know that banks charge overdraft fees when you spend more money than you have in your checking account. You might not realize just how expensive these unnecessary fees can be.
According to a Consumer Financial Protection Bureau study, the average checking customer pays $225 overdraft fees yearly. That’s an absurd price for a temporary loan of $20 or $50.
If you are tired of paying those outrageous bank fees every month, read about your legal rights and how you can fight back against this unfair treatment from financial institutions.
What Is An Overdraft?
An overdraft occurs when you try to withdraw or spend more money than you have in your checking account. Since your bank knows that you don’t have enough money in your account to complete that transaction, it will offer to “cover” your transaction by withdrawing money from your savings account.
Although your bank account will show a negative balance, this does not mean you are in debt. Banks use the term “overdraft” because it’s less scary than “debt.”
For example, let’s say you have $500 in your checking account and try to withdraw $50 from an ATM. That transaction will be denied because you don’t have enough money in your account.
Rather than simply letting you know that you don’t have enough money in your account and denying the transaction, your bank will offer to overdraw your account and withdraw $50 from your savings account. You’ll still have $450 in your checking and $50 in your savings accounts.
The overdraft transaction is only a temporary loan that your bank will pay back as soon as you deposit more money into your checking account.
When Can Banks Charge an Overdraft Fee?
Banks can charge overdraft fees at any time, regardless of the circumstances. Even if you have been an excellent customer for decades, you can be charged an overdraft fee if you don’t have enough money to cover a debit.
By law, banks must give you written notice at least ten days in advance if they intend to charge you an overdraft fee. However, as we’ll discuss briefly, banks don’t care about abiding by the law. They simply want as much money as possible from you.
How to Sue a Bank for Overdraft Fees
If you’re tired of being taken advantage of by banks and credit unions, you might consider taking them to court. For example, you can file a Wells Fargo lawsuit for overdraft fees if you believe they charged you an unfair fee. This doesn’t happen often, but there are cases where individuals and organizations have sued banks and won big settlements.
The first step is determining the amount you want to sue for. You can do this by looking at your bank statements and calculating the number of overdraft fees you have been charged throughout the past year.
You should also calculate the “interest” that the bank has earned from those overdraft fees. This is known as compound interest, which charges you additional money on top of your original overdraft fee.
When banks overcharge customers for overdraft fees, it can hurt people who are already struggling financially. Fortunately, there are some things that you can do to fight back against these unfair fees… and one of them is taking legal action against them. Just make sure to hire a good legal representative to hold your hand during the process.