The Financial Times recently reported that U.S. banks are set to earn $38.5 billion this year from overdraft fees alone, more than double the number from 1994. If you don't know how much is in your bank account, you could easily withdraw or spend beyond your limit or have a check clear that takes your balance below zero. When that happens, banks charge anywhere from $5-$10 in overdraft fees. And that's not all. If you fail to pay back the amount you've overdrawn, you could be hit with even more fees after a set number of days in the form of a large sum (as high as $35) or a daily tariff (often between $5-$10). According to the National Consumer Law Center, the average overdraft fee is $34.65, and considering a purchase as small as your morning latte could put your account in the red, that's a hefty price tag.
Credit cards fare no better, with late payment fees increasing as well as charges for going over your limit. According to a survey done by the Pew Safe Credit Cards Project in March 2009, 92% of credit cards had a fee for exceeding the credit limit, including 100% of student cards. The over-the-limit fee and the late payment fee were both $39 for most accounts. Also, these infringements can result in your interest rate skyrocketing up to 30% or higher. In fact, that same survey found that 93% of cards allow the issuer to raise any interest rate at any time. And once that rate goes up, it is unlikely to come down.
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