Five (5) Unfair Business Practices As To Overdraft Charges

(1) Do you know Overdraft charges are fees withdrawn by a bank when a customer successfully conduct a particular transaction from his bank account which does not have sufficient funds to cover the transaction. The withdrawal is always done upon a subsequent funding the account. In other words, bank accounts do go into overdraft when more money has been taken out of the account than was actually therein. Let's say a bank account has N1000 therein, but the customer makes a debit card purchase for N1100, pushing the account N100 into overdraft. Subsequently the bank  automatically withdraws a certain fee/charge for allowing such transaction whenever the account is later funded. Such fee/charge is referred to as overdraft charge/fee.
(2) Do you know that 61 percent of bank profits from consumers come from overdraft and insufficient fund fees. In most cases customers have complained that they never asked their banks to provide overdraft protection they assumed upon attempt to make a transaction with their debit/credit cards. Such transaction is presumed to be declined. Instead, such transactions are being approved and the customers are left with hefty overdraft charges. Those charges can be as much as let's say N50. That means that N100 into overdraft—overdraft the customer might not have asked for—is costing that customer an extra N50. What's more, customers confirm that they are charged overdraft fees forget every overdraft transaction. So, they may be in overdraft without knowing it, continuing to spend on their accounts and being charged N50 every time they do so—pushing them even further into overdraft. That can add up to hundreds (and in some cases, millions) of Naira in fees.
(3) Do you know that another tactic adopted by banks to increase their profits from overdraft fees is reordering transactions on accounts. This means that regardless of what order transactions occurred on a single day, some banks process the largest transactions first, which often lead to a lot in extra fees for a person to pay.
For example, say a man spends N100, N200, N500 and N1000 (in that order) in four transactions on one day, having N1500 in his account. Either way, the account will likely still go into overdraft. But, if the account is debited in the order the purchases occurred, then only the final transaction will result in an overdraft fee of let's say N50. However, if the transactions are processed from largest to smallest, then only the N1000 purchase will be covered, leaving the customer to pay N50 for each of the final three transactions—for a total of N150 in charges. Some banks have tiered overdraft fees, so that the first overdraft transaction in a certain period costs one amount but any more overdraft transactions cost more.
(4) Do you know another plot by banks to push customers into overdraft is authorization holds. This occurs between the time of a bank card transaction and the time of settlement of the transaction by the merchant. Prior to the merchant settling the transaction, the amount of the transaction is always held, but it would not actually have been withdrawn from the buyer's account. Once the merchant settles the account, which may occur a few days after the transaction, the funds are transferred to the merchant and the customer no longer has the fund in his account. For example, a customer with a N1000 in his account makes a transaction of N300. That N300 is held immediately for the merchant, but is not actually taken out of the account because the money has not yet been transferred to the merchant. The customer cannot access this money, but it is still, technically, in his account. When the merchant submits her batch of transactions, the money is then taken from the account and transferred to the merchant.This basically is lawful; however, some complaints confirm that the banks back-date such transactions to the date they occurred, not the date they were settled hence pushing the affected accounts into overdraft because they may not have had the funds necessary on the date the transaction occurred but did have the funds necessary by the day the transaction was settled.
(5) Do you also know that delay in posting of debits and deposits is another practice by Bank to push accounts into overdraft. For example, banks are required by law to make a check deposit available to a customer within a certain number of days. However, they can choose to make the deposits available sooner. Customers have complained that check posting is occurring inconsistently meaning that customers cannot predict when a deposit will be posted to their account. Sometimes, they say, the check is posted immediately while other times the check is not posted until after the accountholder goes into overdraft.

Please beware!

Omowunmi Abdulkareem Esq.