 Fighting those pesky NSF fees
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 Dear
Dr. Don,
What can I do about excessive overdraft fees? An electronic transfer
posted a day later than expected and my checking account became
overdrawn. Five transactions posted to my account and the bank charged
me $34 for each. The telephone representatives were unwilling to
provide any relief.
Is there anything I can do?
Thank you,
-- Michael Mutiny
 Dear
Michael,
Writing checks for money that isn't in your account is euphemistically
called either "playing the float" or "kiting checks,"
depending on your perspective. Regardless of your perspective, it's
gotten progressively harder to do with improved efficiencies in
check-clearing procedures.
Check 21 is just one example of these improved efficiencies.
The Bankrate feature, "Check
21: New law ends checking traditions," discusses Check
21 in more detail while another feature, "That
floating feeling: Technology makes the float risky for consumers,"
discusses the changing landscape in check clearing with some hints
on how to manage that process.
Bottom line is that you're going to have to manage your account
more carefully to avoid these fees. According to Bankrate's
checking cost survey, the national average for an insufficient
funds charge, or NSF, is $26.90, so your bank's $34 is a bit pricey,
but the key is to avoid these fees, not find a bank with low NSF
charges.
Often banks draw the checks against your account by size, with
the largest check going against your account first. If the order
were reversed, it could minimize the NSF charges, but the bank isn't
looking to minimize these charges.
The temptation is to vote with your feet and find a new bank, but
that becomes problematic because these NSF transactions are likely
to show up on your ChexSystems consumer banking report. Banks will
typically pull this report as part of the account application process
and may decline your business based on this report. Negative information
stays on your consumer banking report for five years. You have the
ability to dispute any negative information on your report, but
I don't see the point in your case. This specialty consumer report
falls under the provisions of the 2003 Fair and Accurate Credit
Transactions Act, so you are entitled to one free copy of that report
each year. The Bankrate feature, "Specialty
consumer reports reveal your secrets," tells you how to
request this report.
Assuming we're talking about a brick-and-mortar bank, go into your
home branch and calmly discuss your NSF problem with an account
relationship manager. You may find a more sympathetic ear. While
you're there, discuss the overdraft protection options the bank
has, which may include a line of credit, a credit card or a savings
account linked to the checking account. Of course, the linked account
requires you to build a cash cushion to be available in the savings
account.
A cash cushion is a great idea. You've gone beyond living paycheck
to paycheck when a day's difference in a deposit getting credited
to your account creates $170 worth of NSF fees. It may take some
time to get to the point where you have the cash cushion. Another
form of overdraft protection, such as a line of credit or credit
card, can serve as an intermediate solution.
If your bank offers it as an inexpensive option, try using online
banking as part of your bill-paying strategy. There are some float
issues here as well, but you at least have the ability to see when
money has been credited to your account.
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