5 Sly Ways Banks Push Your Account Into the Red

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Banks earn billions from overdrafts -- here's how. And here are five ways to protect yourself.

Overdraft fees continue to be big business for banks, despite a 2010 Federal Reserve rule preventing banks from automatically enrolling customers in overdraft programs.

The changes since 2010 include an increase in the median fee that customers pay for withdrawing more from checking than the account holds. They rose to about $30 in 2013 (a record), up from $29 in 2012 and $26 in 2009. This data is based on a survey of nearly 3,000 banks and credit unions by Moebs Services Inc., an economic-research firm in Lake Bluff, Ill., according to The Wall Street Journal.

Of course, your money mismanagement contributes to all overdraft fees, but banks aren’t necessarily looking to help you stay in the black. Instead, some banks have policies designed to push accounts into the red whenever possible.

Here are five sneaky ways banks squeeze more overdraft fees from their customers.

1. Persuading you to opt for overdraft protection

Let’s start by talking about that 2010 Federal Reserve rule for a minute. Before its implementation, banks could automatically enroll customers in overdraft protection. Now, they must get customers to opt in.

However, it appears some banks aren’t being entirely transparent about what customers are getting into when they sign up for overdraft protection. According to a 2014 survey by the Pew Charitable Trusts, more than half of those who had overdrawn accounts didn’t realize they had opted into a program that would result in fees.

2. Processing largest payments first

Another sneaky tactic is reordering your transactions so the largest items go through first. A representative of the American Bankers Association was quoted in Forbes as saying some banks do this to make sure large, important transactions such as mortgage payments make it through the account. But it seems like a highly convenient way to maximize overdraft fees.

That Pew Charitable Trusts survey also found that all 12 of the largest banks, in terms of deposit volume, either reordered transactions to run the largest first or reserved the right to do so. However, some banks, such as Citi, have since reversed course and are now processing transactions in order from smallest to largest.

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