Even Regulators Pay Overdraft Fees

Even at credit unions.

Lawmakers want to limit how banks and credit unions use overdraft fees. These fees can end up looking like very expensive loans, and they tend to hurt poorer populations the most.

However, the Associated Press reports that credit unions used by these lawmakers still charge $25 or so for "courtesy pay" features - a form of overdraft protection. The AP quotes the U.S. Public Interest Research Group's Ed Mierzwinski:

"It's disappointing if the most influential Washington, D.C., credit unions are using practices designed by consultants to extract money out of their members."

Credit union customers (called "members" because they are partial owners of the institution) don't make all the rules at a credit union, but they can be influential. Mierzwinski argues that these credit unions should lead the way away from overdraft fees, and he doesn't like what he sees.

• How Credit Unions Work

The story highlights a few issues. First, overdraft protection is expensive. Don't spend more than you have. If you have to use overdraft protection, try to use an overdraft line of credit instead of paying a flat fee - it often costs less.

• How Overdraft Protection Plans Work

Also, we see that some credit unions act like banks with a tax benefit - using programs that maximize revenue at the expense of a minority of customers.

Further reading:

• Courtesy overdraft fees hit credit union customers, too
• Feds Eye Overdraft Fees