TODAY

TODAY   |  June 12, 2013

Federal regulators warn about banks overdraft fees

The Consumer Financial Protection Bureau issued a report Tuesday warning about bank overdraft protection, suggesting financial institutions are making a fortune off consumers. TODAY’s Matt Lauer reports and personal finance expert Carmen Wong Ulrich discusses how to avoid the fees.

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>>> with a check ago count needs to hear. federal regulators are sounding an alarm over huge overdraft fees. according to a new study they earn banks about $12.6 billion in 2011 alone and the average customer shells out $225 in charges every year. personal finances expert has taken a close look at this new report. nice to see you.

>> good morning.

>> this is a bigger percentage. 61% from overdraft penalties or the fees they charge to sign up for automatic protection.

>> what's scary is the majority of people paying the fees are people that can't afford these fees. more than half of the folks paying for overdraft make less than $50,000 a year.

>> the irony is here you're being charged extra money at the time you obviously don't have extra money.

>> it's a small amount of money. the majority of times that people get charged overdraft they're swiping or pulling out $20 out of their account and the overdraft fee is more than that.

>> you can opt into a program that automatically covers you if you overdraw your checking account . did this study say it was a good idea to be a part of the program or bad idea.

>> it's an idea that costs a lot of money. for the folks that opted out, you pay hundred of dollars less in fees but also involuntary closure. banks are close people's accounts involuntarily which puts them into the prepaid cards and payday loans and these are people with lower incomes.

>> by the way, a lot of people don't even know they're in the program so they're paying the fees month to month without realizing why.

>> that's the problem.

>> tips from you, don't opt in, keep a tank a quarter full.

>> make sure if you're at a quarter tank or half tank make sure there's gas in there and then you gas. same with your account. 50 to $100.

>> sign up for low balance alerts. careful with automatic bill pay. here's the danger, if your budget so tight you need to do this by hand. pay your bills by hand. so you know where your balances are and don't swipe very much.