Overdraft Loans
Many people who have checking accounts pay extra for the privilege of overdraft protection. So if you write more checks than you actually have money to cover, the bank will let your account go into a deficit to clear the checks without a problem. There is a catch – that is, the fees for this service can be high.
Overdraft protection is another form of loan or credit and so it pays to know the facts. Currently, most banks in the U.S. charge an interest rate on the overage amount at a higher rate than on accounts that do not permit overdrafts. Plus there is a $35 fee for each transaction that hits the overdraft corridor.
Consumer groups are outraged at what they call “usury” fees. What that means is that rates are considered to be exorbitant and by definition that translates to unfair business practices. In fact, the U.S. Public Interest Research Group has stated …” "Overdraft fees are a form of predatory loan made by banks. There is a way around high overdraft fees if you qualify for a line of credit. In this form of lending, the bank allows you to go over your limit for more modest fees like $5 or $10 and on a line of credit the interest rate is in the vicinity of 15%. Generally, the line of credit option is reserved for those with excellent credit ratings.
Here is an example: You write a check for $100 knowing you have that much in your bank account. You have overdraft protection so you aren’t concerned when the next day you make three purchases on that account at three different stores. No worries, right? You’ve got overdraft protection. Meanwhile, you get your bank statement and before you fall over, you realize just how much those three purchases really cost you. The bank has charged you $35 three times for a total of $105.00!
