Customers with overdraft protection pay quadruple in fees

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Using overdraft coverage is an expensive way to manage your checking account, a Consumer Financial Protection Bureau study shows.

Banks used to force people into overdraft programs until 2010, when the Fed forced banks to make it opt-in only. Now, just 1 in 7 checking account customers opt in for the protection. And those who opt for overdraft protection pay dearly for it:  Their monthly average fee was $29.09, quadruple the $7.26 average for people who did not opt in, says the federal consumer watchdog agency's study , released in July 2014.

Most people get hit with overdraft fees by using checks or debit cards on transactions of $24 or less, the consumer bureau found.  The typical overdraft fee is more than that, at $34. And when you consider that most overdrafts are repaid in three days, the fee amounts to a whopping annual percentage rate of 17,000 percent.

The data were collected from several large banks with assets over $10 billion. Information was gleaned from roughly 2 million accounts.

See related: Feds change rules so consumers must opt in to overdraft protection , More infographics

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This article appears in: Personal Finance , Credit and Debt

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