Overdraft Charges: A Shell Game?

When you run out of money in your checking account, you may have a safety net called "overdraft protection". If you write a check but you don't have the money, you bank may pay the check, charge you a fee, and collect from you later. What happens if there are multiple checks that come through in the same day? Would you pay several fees? In most cases, you'll pay as much as possible.

The banks typically clear larger checks first -- even if the smaller checks came in before the large ones! The Wall Street Journal's Your Money Matters Podcast recently explained what banks are up to (MP3 Download). They'll switch your transactions around (the "shell game") so that you pay more in fees. Of course, banks claim that this helps you avoid bouncing those big important checks -- like your mortgage payment.

Further reading:

• All Personal Finance Podcasts