Reversal of an overdraft position
Most bank customers sign up for new current accounts without having a full and complete understanding of many of the account’s terms and conditions (Ts&Cs). One of the most commonly misunderstood Ts&Cs is that of overdraft protection programs.
In general, the function of an overdraft protection program is to allow the bank to cover (pay) an outstanding charge for a debit, credit or check made against a checking account that does not have sufficient balance to cover the charge. In return, the bank will charge the customer a fee for this service. The fee is applied directly to the account balance at the time of billing, adding to the already negative balance.
One of the most misunderstood aspects of overdraft protection programs by consumers is the fact that a bank will allow a debit card charge to be approved and processed even if the account balance is negative! Most checking account customers mistakenly believe that the bank will simply reject any debit purchase they try to make if the balance is too low to cover it. Not like that! Instead, the bank will honor it and then charge an overdraft fee. This simple misunderstanding leads to billions of dollars in extra income for banks in the form of overdraft fees.
Not only are banks slow to dispel this misconception about how overdraft protection works – many actively engage in practices designed to increase the likelihood of multiple overdrafts occurring on the same day, thereby increasing the number of charges for overdrafts that earn. They do this by first processing the larger amount transactions made on a given day, then processing the smaller transactions. By doing it this way, you increase the likelihood of an overdraft. The result: as the last few transactions are processed, each one can result in an overdraft fee being charged.
If you’ve recently noticed one or more overdrafts on your bank statement, you probably want to do everything in your power to eliminate them. This feeling can be especially strong if you believe that the overdraft is the result of a fraudulent practice on the part of the bank.
To get an overdraft reversal request accepted by your bank, try the following steps:
1. Get a copy of your bank statement online or on paper.
2. Find the row in question by looking at the date of the transaction that resulted in one or more overdraft fees being charged to your account. These will be expressed as a debit to your account (shown with a minus sign, like a withdrawal).
3. View the current account balance displayed on your account on the day and time of the charge that resulted in the overdraft. Was it still showing as positive at that time? If so, you may be able to convince your bank that its statement is unclear and that a reasonable person would conclude that there was a balance in the account at the time.
4. Remember that when calling your bank it is important to be polite and friendly. They receive thousands of complaints every day about overdraft fees and are ready with verbal ammunition to fire back at you. Their most common trick: making it seem obvious that you made the mistake, not them. But anyone who has seen a typical bank statement knows that they are far from straightforward.
5. If you can’t get the representative over the phone to waive your overdraft fee, consider writing to your bank’s head office to make a formal complaint.
Of course, all this protest work takes time, and for many of us, time is money. Sometimes it can be easier to give up trying to fight your bank over a fee rather than opting to switch to a bank that doesn’t charge overdraft fees. There are banks on the market today that will never charge you an overdraft fee – even if you go over your account!
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