After Maria did the math, she was aghast. Since the start of the year, the Houston woman said, she and her husband have paid more than $1,200 in overdraft fees at their local credit union.
Maria, who asked that ABCNews.com withhold her full name, said part of the problem lay in the fact that the credit union didn't seem to be posting her debit card charges and big bill payments, like car loan payments, in the order she was making them. Multiple, small charges would be applied later than large ones, triggering many overdraft fees.
"We were having a hard time keeping up with the bills and to have all these overdraft charges come in and attack us, hit us even harder," she said.
The order in which banks post charges is one of several issues lawmakers are looking to tackle amid growing public uproar over overdraft fees -- the fees banks and credit unions levy when a consumer overdraws an account. Proposals floated by Rep. Carolyn Maloney, D-N.Y., and Sen. Chris Dodd, D-Conn., both include measures addressing the timing of bank transactions.
Banks often process large payments ahead of small debit card charges made the same day -- a practice sometimes called reordering. It's a safeguard, banks say, to ensure important bills such as mortgage payments get paid off first -- but critics allege that reordering allows banks to increase the number of overdraft charges they collect.
It's a "gotcha-type practice," said Greg McBride, senior financial analyst at Bankrate.com
Maria said that, in her case, her credit union processed her car payments and insurance payments ahead of small debit charges made the same day. After the large bills sapped the funds in her account, the credit union would then apply the small charges Maria made on her debit card for expenses like trips to the pharmacy or movie rentals. Those triggered multiple overdraft fees.
Maria said she would rather have contended with one overdraft charge on one big bill than multiple overdraft charges on several small ones.
"We need to watch our money better," she said, "but at the same time they need to stop moving our transactions around in a way that's hurting us."
Banks Announce Overdraft Fee Changes
For its part, Maria's credit union, First Community Credit Union of Houston, denies that it applies large charges ahead of small ones. Rather, it says it does the opposite.
"We do the little ones first, and then we do the larger ones, just for that purpose to avoid" levying more overdraft charges, said Nancy Trennel, First Community's vice president of marketing.
Other banks, however, have conceded to the practice, including consumer banking giant Chase.
But Chase is also changing its tune: The bank, a branch of JPMorgan Chase & Co., announced last week that, starting next year, it would recognize debit-card transactions ahead of checks. The change was part of a broader plan to change its overdraft policies.
JPMorgan spokesman Thomas Kelly said the bank decided to make the change at the behest of customers who were sick of realizing that charging a $3 cup of coffee on their debit card could lead to a more than $30 overdraft fee.
"If you say 'I had a $500 car payment and that caused me to have a $30 fee,' you go 'I guess should have had the money in there,'" he said. "It's the $3 and $30 that makes people so frustrated."
Other overdraft changes announced by major banks last week include allowing customers to decide whether they would prefer to have charges rejected instead of incurring overdraft fees (Chase, Bank of America, Wells Fargo and U.S. Bank), eliminating overdraft fees if the overdrawn amount is less than $5 (Chase, Wells Fargo) or $10 (Bank of America and U.S. Bank), and limiting the daily maximum number of overdraft fees to three (Chase, U.S. Bank) or four (Bank of America).
Critics say that banks could still be doing more to help consumers. Overdraft fees, they say, should still be lower.
What Consumers Can Do
No matter what banks do, Bankrate.com's McBride said, the ultimate responsibility lies with the consumer.
Bank customers can avoid overdraft fees, he said, by linking checking accounts to savings accounts and by signing up for bank text message or e-mail balance alerts.
"Consumers who have sloppy habits and spend more than they have are still going to find themselves in financial trouble one way or another," he said. "The best course of action is stay on top of your account."