Is it Really Overdraft Protection?
Published January 20th, 2007 in Credit Help and Tips.A friend of mine recently had an overdrawn account with Wells Fargo, and though he had overdraft protection, he still ended up paying $10 for a cash advance from their overdraft account.
What’s ironic is that even with overdraft protection in place, a fee of $10 was assessed for a $5.00 excess. While it makes sense to be charged for overdrawing an account, it seems strange that you would still be hit for a fee if enrolled in an overdraft protection service.
The fact is, the overdraft protection is really just overdraft reduction, as it reduces the typical fee of $35 to $10. While it’s a savings of $25, it still irks me that Wells Fargo would charge its customers despite being enrolled in a program that seemingly protect them from such fees.
I decided to call Wells Fargo to investigate this matter further, and see if there truly was a way to protect yourself from an overdraw. It seems that the overdraft protection program was the only way to reduce the penalty, but nothing could be done to outright prevent the problem.
I asked if you could set your check card up to automatically be declined if you didn’t have the available funds and they said no. Their only “solution” was to limit your daily spending limit although that would do little to solve the problem.
It seems Wells Fargo and other banks rely on these overdraft fees among other fees to turn such a nice profit quarter after quarter. After all, why limit what a customer can spend if they can tack on a fee of $35 and get the sale?
Federal regulators have already mentioned confronting banks on the high costs of fees associated with credit cards and check cards. I overheard that banks are charging nearly six times the cost of the debt on average in late fees and overdraft penalties. This really needs to be regulated.
