Times are tough, and sadly millions of hard-working Americans find that their bank accounts sometimes wind up overdrawn, even if it’s only for a couple of days until the next paycheck comes in. Many banks are ready and willing to pile on charges and fees whenever that happens. But while consumers have come to expect overdraft fees, they don’t expect to be hit with “Extended Overdraft Fees” as high as $36.00 for accounts overdrawn for even a few days.
Overdraft fees are huge money-makers for the banks, raking in approximately $30 billion each year. Unfortunately, that money often comes out of the pockets of people who are already under enough financial pressure without their own bank driving them further and further into debt. Extended overdraft fees make up a growing percentage of these fees – as high as 10% already by some accounts – as banks look for new ways to get around legal limits on overdraft fees to draw more revenue from their customers.
Many states impose a legal limit on how much interest a bank can charge you, and labeling an interest charge a “fee” on your bank statement doesn’t magically let them ignore that limit if they’re not provided any additional service.
For example, New York puts a 16% cap on most consumer loans, but if you’re a Chase Bank customer, they may be charging you $15 after only five days, even if you’re only overdrawn by a couple of dollars. If you were overdrawn by $200, then five days at the maximum 16% annual interest should only cost you 44¢. Charging someone $15 for five days of interest, even on a $200 overdraft, amounts to over 500% annual interest.
The chart below provides examples of several banks known to charge these extended overdraft fees, and the fees they may be charging.
By calling their “Extended Overdraft” charge a “fee” instead of “interest,” your bank may be getting around banking laws that would limit them to a fraction of the amount they’re charging you. If you or someone you know has been hit with an Extended Overdraft Fee without being provided with any additional service, please contact us to discuss your legal rights and options.