The Consumer Financial Protection Bureau released a new report Tuesay that shows wide variations when it comes to how much banks are charging their customers when they overdraft their checking accounts.
An overdraft fee occurs when you spend more money than you have in your account.
Since 2010, federal law requires banks to only charge overdraft fees if consumers "opt-in" to overdraft protection. That means if you use your debit card for more than is in your account, the purchase will go through, but you will be hit with a fee.
Without overdraft protection you will be denied the purchase at the point of sale.
The CFPB's report found overdraft practices varied greatly from bank to bank and are highly complex.
For example, some banks only allow two overdrafts in a day, while other banks allows as many as 12 per day.
It also found complex transaction postings. This is the order in which check, debit card and other transactions are posted to accounts, which can influence the number of overdraft fees.
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It showed consumers who opt in to overdraft coverage are more likely to end up with involuntary account closures, which are often a result of negative account balances.
The CFPB also found consumers who opt out of overdraft protection saved $450 in fees in one six-month period.
