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Why did the bank charge an overdraft fee on a low-balance account?

November 24, 2011

By Richard Barrington | MoneyRates.com Senior Financial Analyst, CFA

monthly maintenance fee

Q: My daughter had a low balance in her checking account ($2) and got hit with an overdraft fee, so now she has a negative balance. She did not write any checks or use a debit or ATM card. How could they assess an overdraft fee when she had a balance in the account?

A: There are two likely possibilities for what happened:

  1. There was a fee charged to the account. Perhaps the bank imposed a monthly maintenance fee or minimum balance penalty, or else there was a fee for some other service, such as getting checks printed. In any case, if the account's balance wasn't sufficient to cover the fee, it would have overdrafted the account and triggered the overdraft fee.
  2. There may have been an error. Perhaps your daughter made a book-keeping mistake, or the bank charged the account in error. You can determine this by checking your daughter's records against the bank's records transaction-by-transaction.

Whatever the cause of the fee, the bank should be willing to work with you to get to the bottom of it. Then you need to take a couple of additional steps:

  • If the overdraft was a one-time occurrence because of an honest misunderstanding, you may be able to get the bank to waive the fee this time. Some banks are more forgiving about this kind of thing than others, but it's worth asking.
  • You need to determine whether this checking account is right for your daughter. If she is going to carry a low balance, you need to find an account with no monthly maintenance fee and with no minimum balance requirement. There are checking accounts like this especially for students.

Got a financial question about saving, investing, or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

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