For some consumers, it can be difficult to avoid overdraft fees, especially during the holiday season. Much of this struggle can be attributed to overspending, commercialism, and the economy, but part of the reason some find it hard to avoid overdraft fees due to misinformation and deceptive practices.

For instance, many consumers do not actually know how their bank’s overdraft protection services work — even when they are the ones that signed up for the program in the first place. Consumers pay more than $17 billion in overdraft fees each year, according to the Consumer Financial Protection Bureau (CFPB, the government’s financial watchdog).  This is a quickly rising annual figure, and yet many consumers still do not know how to avoid overdraft fees.

What is Overdraft Protection?

It is now considered pretty standard for banks and credit unions to offer overdraft protection programs to prevent customers from hitting the bottom of their account and being unable to make a transaction. In exchange for an overdraft fee, money is transferred to cover the transaction when the card otherwise would have been declined. The transferred funds may come from a linked savings account or from a line of credit.

Overdraft fees average around $31, but these fees are steadily rising and at some banks are actually much higher.

It can actually be very difficult to avoid overdraft fees, especially when one’s bank account is usually fairly low and in constant danger of being overdrawn. Unfortunately, these are often also the consumers who can least afford to pay overdraft fees on a regular basis. On top of this, overdraft fees compound. This means that for any additional transaction on an overdrawn account, a new fee is added. These overdraft charges can quickly add up.

Unfortunately, many consumers may not understand that the most effective way to avoid overdraft fees is to opt out of overdraft protection from the start. Consumers can also contact their bank and opt out after the fact. The CFPB suggests setting up low-balance alerts that are set low enough to be effective but high enough to provide an actual buffer before the account is overdrawn.

Smartphone apps make it even easier to check your balance than ever before. Setting up overdraft transfer — that is, having your checking account pull money from your savings account in the event you overspend — is also a possibility. Though this usually involves a small transfer fee, this is usually less than an overdraft fee.

As many as three in four consumers do not even realize that they have a choice to opt in or out of these programs, according to a recent report from the Pew Charitable Trusts. According to one representative of Pew, Thaddeus King, people “don’t seem to understand that when you opt out, you don’t pay the fee.” This suggests that the communication from banks regarding these programs is currently ineffective. Some even claim that banks’ overdraft protection policies can actually be deceptive.

Deceptive Overdraft Practices

Other than the general lack of understanding surrounding overdraft fees and programs, some banks and credit unions may actually be using these programs to take advantage of their customers.

Some banks reportedly make a practice of deliberately reordering transactions to collect more in fees, from highest to lowest rather than chronologically, making each successive transaction increasingly more likely to overdraw the account. A large fee processed earlier can tip the account to overdraw earlier, with each successive transaction racking up racking up more overdraft fees.

Filing an Overdraft Lawsuit

Several financial institutions are currently under investigation for deceptive overdraft protection policies. Last year, HSBC Bank settled a massive class action regarding its overdraft fee policies for $32 million.

If you have been affected by deceptive overdraft charges or practices from HSBC Bank, Capital One, or another bank, you may be able to file a lawsuit.

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