Protect Us from Overdraft Protection

Maybe with the current economic crisis nipping at our wallets, questionable banking practices will get the scrutiny they desperately need. And I'm not just talking about subprime mortgages, credit default swaps, and risky investments. I'm talking personal banking. I'm talking overdraft fees.

I've been hit with them before, but now that my currently unemployed fiance and I are relying solely on one income to cover our bills, we're getting flogged. We both bank with Bank of America, and at the moment, I have a pretty big bone to pick with these shady practices.

Here's a quick rundown of what you get with Bank of America:

* Pending transactions are just that - pending. As in not yet processed. So when you check your balance at an atm, online, even over the phone, the balance you'll see won't be your current balance, but your current balance plus or minus any transactions that haven't posted yet.

* Transactions are processed from largest to smallest. Meaning be prepared for a waterfall of $35 overdraft fees. All because Bank of America decided to process your $700 rent check before your $25 in gas, your $8 bag of cat food, your $4 smoothie, and your $3 magazine. Before you even realize you're in the red, you've just racked up $140 in fees.

* Oh and by the way, this free service comes standard with your checking account. It's called overdraft protection and while it might protect you from bouncing checks, it won't protect you from their fees.

Of course, BoA isn't the only one taking advantage of their consumers with exorbitant fees. It seems all the big banks are doing it according to an FDIC survey. And the survey says...

According to the FDIC:

•Most banks that automatically enroll consumers allow them to overdraw by check, ATM or debit card purchases. About half of all overdrafts occur at ATMs or via debit card transactions, which tend to be for smaller dollar amounts.

•Banks surveyed earned $1.97 billion in overdraft-related fees in 2006, representing 74% of their overall $2.66 billion in service charges on deposit accounts. In total, overdraft-related fees bring in $17.5 billion each year to banks and credit unions, estimates advocacy group Center for Responsible Lending.

•Large banks are more likely to process transactions from largest to smallest dollar amount, often triggering more fees.

•Young and low-income consumers are disproportionately affected by overdraft fees. "The most vulnerable consumers are getting hit with these fees," says Chi Chi Wu of the National Consumer Law Center.

HOW BANKS PROCESS TRANSACTIONS

Large banks are more likely to clear checks from large to small dollar amounts, often triggering more overdraft fees. Asset size Pct. of banks clearing checks large to small Less than $250 million 20.7% $250 million to less than $1 billion 25.8% More than $1 billion 53.7% All banks 24.7% Source: FDIC survey of 1,171 banks it regulates; 289 banks responded to question about check clearing and dollar amounts