Overdraft protection for debit cards can seem like a useful tool, but consumers can be charged large fees for even the smallest of debit card overdrafts.

Even for a small purchase that that causes an overdraft, your bank may charge you an overdraft fee of up to $35, regardless of how small the initial purchase was. This fee is incurred with each purchase in overdraft.

According to a report from the Consumer Financial Protection Bureau, banks in the U.S. make a great deal of money on debit card overdrafts. The CFPB reports that banks bring in close to $30 billion each year from debit card overdrafts and nonsufficient fund charges.

Though it can come as a relief to be able to make purchases even when your account is overdrawn, overdraft fees can compound quickly.

According to the CFPB, some banks cap their overdraft fees or have programs that don’t allow for extremely minor debit card overdrafts, such as accounts that go into overdraft by under $5.

The CFPB reports, however, that some banks will allow up to 12 overdraft and nonsufficient fund fees to be charged in a single day.

Customers Must Opt-In for Overdraft Protection

While banks are required by federal law to ask customers to opt in to overdraft programs, many may not be adequately informed of how these programs work and what kind of fees they could be charged.

Yet some banks still automatically enroll customers into overdraft programs under the guise that the bank is performing a courtesy for its customer.

For instance, according to Flagstar bank’s website, customers in good standing after a 60-day qualifying period are automatically enrolled in the bank’s Bounce Protection program and must inform a customer service representative or sign a waiver if they do not want to participate or opt out of the program.

Additionally, Flagstar Bank has reportedly one of the highest overdraft fee rates, charging customers a $36 nonsufficient funds fee for each paid item paid under the Bounce Protection “privilege”.

Excessive Fees for Debit Card Overdrafts

The average consumer with debit card overdrafts in 2011 paid $225 in overdraft fees, according to the CFPB. Others may have paid much more.

Avoiding overdraft fees can be simple. First, simply decline or opt out of overdraft programs. While it can be awkward for your card to be declined, you will avoid overdraft fees and save money in the long run.

You can also choose to link your accounts together, so that if you exceed what is in your checking account, you can access your savings account as another method of overdraft protection. Yes, banks generally charge a transfer fee for this, but these fees are usually about $5 to $10 instead of over $30.

A growing number of bank customers are choosing to file lawsuits over unfair debit card overdrafts. These lawsuits allege that overdraft programs involve excessive overdraft charges, and are often misrepresented to customers in the first place.

If you have been hit with excessive overdraft fees, you may be able to join a class action debit card overdrafts lawsuit.

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