With a quick swipe of a debit card, U.S. consumers can purchase just about anything. From parking meters to coffee shops, each year it is getting easier to live in a cashless society.

However, with the convenience and ease of using a debit card, oftentimes customers forget to check and balance their bank accounts, which can lead to expensive overdraft fees.

The collection of nonsufficient funds fees, or overdraft fees, is a common practice for banking and credit unions. The average charge is $34 per incident, a not insignificant amount.

According to the U.S. Consumer Financial Protection Bureau, the average financial institution consumer will pay nearly $260 per year in overdraft fees if they participate in an overdraft fee program. 

What is an Overdraft Fee Program?

Credit union and banking customers have several options when it comes to dealing with overdrawn accounts. In a recent financial article published by nerdwallet.com, the online source claims that checking account customers are usually given three options to help cover accounts that have gone in the “red.”

First, credit union and banking customers can decide to opt out. This means that the bank will reject any pending transaction that will overdraw an account. Consumers will not have to pay an overdraft fee, but may still face a nonsufficient funds fee if the transaction involved a bounced or rejected check.

The second option credit union customers have is overdraft protection. This option allows consumers to link their checking account to a savings (or other) account to help cover a transaction if the checking balance is too low. The majority of credit unions and banks charge a fee for this transfer service, although it is less than an overdraft fee, making it an attractive option.

The third option available to banking customers is the most expensive. Under this option, checking account consumers will allow the financial institution to cover the transaction, while they incur a charge of around $34.

Credit Union Overdraft Fees

According to the research group Pew Charitable Trusts, 84 percent of the major banks they studied make it clear to consumers that the default option is to deny transactions rather than going with an overdraft fee program. Pew claims that the numbers have almost doubled in two years, up from only 47 percent of banks who clearly identified that as the default option in 2013.

While the average overdraft fee is $34, some of the top credit unions charge slightly less than that. For example, Alliant Credit Union charges $25; Connexus Credit Union charges $29.95; Consumers Credit Union charges $30; and the Navy Federal Credit Union charges $20. The Pentagon Federal Credit Union does not offer an overdraft service so customers will face a $30 nonsufficient funds fee if the balance is overdrawn.

Credit Union Overdraft Fees Class Action Lawsuit Investigation

Multiple credit union lawsuits have claimed that credit unions assess overdraft fees on the available balance, which then causes an overdraft fee to occur even if the actual account balance did not go negative.

Credit union customers have also complained that these financial institutions are raising overdraft fee rates faster than banks.

There are numerous credit unions facing scrutiny for potentially maximizing overdraft fees for their customers by placing transactions out of order. Some of them include:

• Patelco Credit Union, Pleasanton, Calif.
• United Nations Federal Credit Union, Long Island City, N.Y.
• Wings Financial Credit Union, Apple Valley, Minn.
• Ent Federal Credit Union, Colorado Springs, Colo.
• Hudson Valley Federal Credit Union, Poughkeepsie, N.J.

Contact an overdraft fee attorney if you were charged a credit union overdraft fee and are interested in joining a credit union class action lawsuit.

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