Bank overdraft fees can be too easy to rack up

— -- Banks are increasingly offering tools such as balance alerts to help manage accounts. But consumers say it's still far too easy to overdraw their accounts.

Nancy Tersigni, 43, a divorced mother of two in Tampa, says she recently incurred $175 in overdraft fees for small-dollar debit card purchases such as coffee and lunch. She's angry that large banks clear transactions in a way she says maximizes the fees she pays.

Kelly Spradlin, 33, regularly checks her account balance via phone to avoid overdrawing her account. But that didn't keep her from getting hit with overdraft fees of $400 within a few months last year. Living on a tight budget, she says the fees "affected my (ability to pay) groceries, gas money, everything you need to live on."

Banks say that good financial management can help consumers avoid most bank fees, including charges for overdrawing their accounts. Most banks, for instance, allow consumers to set up alerts that warn them if their balance dips below a specified amount. Many banks also provide free access to accounts online, by phone and via ATMs.

Industry representatives say consumers should take responsibility for managing their money and not blame banks for their fiscal woes. "Consumers are in the best position to know what their balances are and to pay attention to their money," says Nessa Feddis, a vice president at the American Bankers Association (ABA).

Bank practices may contribute

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But Lauren Zeichner Bowne, a staff attorney at Consumers Union, says banks' policies make it difficult for consumers to avoid overdrawing their accounts, and disproportionately hurt the most financially vulnerable. How that's happening:

•Automatic enrollment. Banks have long offered traditional overdraft protection that consumers sign up for. These programs, for a small fee, transfer money from a savings, credit card or home-equity line of credit when consumers don't have sufficient funds in checking to cover a transaction.

But in recent years, banks have also begun automatically covering consumers' overdrafts — even if they didn't sign up for a service — and then charging them a fee for doing so. This automatic coverage, which banks sometimes refer to as "courtesy overdraft," has come under fire from lawmakers, regulators, advocates and even attorneys.