One of the ways that you might be leaking money is through overdraft fees. Bank fees have been the subject of much debate recently. Lately, Richard Cordray, the head of the new Consumer Financial Protection Bureau, has been taking aim at overdraft fees, looking at ways to better educate consumers on the costs of overdraft fees, and encouraging banks to share better information about how fees are incurred.

A main issue associated with overdraft fees is the way they are processed. In some cases, banks will process larger purchases first. This results in the account being overdrawn faster, and then smaller purchases end up triggering overdrafts — and their fees. The new bureau is considering the idea of requiring banks to change the order in which they process transactions, in order to reduce fees.

Educating Consumers About Overdraft Fees

Right now, banks offer “standard” overdraft protection services. These services allow consumers to overdraw their accounts by a certain amount. Purchases are allowed to go through, rather than being denied at the register and causing embarrassment. As a result, a fee is charged. This fee can be anywhere between $15 and $45 (or more) for overdrafts. This means that a $2 overage can cost much, much more.

Cordray is considering whether or not to require banks to add disclosures to statements. These disclosures would clearly show the fee, as well as what triggered the fee. The hope is that requiring a disclosure would educate consumers to keep them from overdrawing their accounts as much.

But would showing consumers what they’re paying in fees really help?

The Convenience Of Overdraft Fees

The fact of the matter is that many consumers would probably still overdraw their accounts — even if they had a clear idea of how much money is leaking from their accounts as a result of overdraft fees. This type of overdraft protection is highly convenient. Instead of worrying that you don’t have quite enough money to complete a purchase, your transaction is simply allowed through. Many consumers are willing to pay the fee if it means the convenience of not being denied at the checkout counter, or if it means they can still make a few purchases even though they don’t have the money in their checking accounts.

Some consumers likely use overdraft protection as part of their regular banking habits, factoring it into how they make decisions about purchases. Unfortunately, these fees can add up, leading to the payment of hundreds of dollars a year. For some, though, the convenience outweighs the cost. Instead of worrying about tracking spending and budgeting, it is easier to just spend money, and pay the fees when there are overdrafts.

Once in the cycle, though, it is difficult to break it. It’s easy to fall behind, since you have to pay the fees to get back in the black with your account. So, that’s money that comes out of your account, and that you don’t have to use for other necessities. It can easily become a regular monthly cycle. Instead, you’re better off breaking the cycle, and making efforts to track your spending and budgeting to live within your means.

It’s true that consumers appear to have won a battle against bank fees. Bank of America announced that it will not go through with its intention to charge a monthly fee of $5 for debit card usage. Thanks to  great deal of outcry, and people actually moving their money, Bank of America is back-pedaling on its decision to charge for debit card usage. Consumers have seen what they can do, and the big banks are honoring their wishes (at least with regard to debit card fees).

At least for now.

The bank fee war is far from over, though. While it’s true that banks still make money off taking the money you deposit (at low yields) and lending it out to others (at higher interest rates), banks have become more and more focused in the last few years on revenue from fees. And, as caps on overdraft fees and debit card transaction fees are introduced, banks look for additional ways to make money off fees. Fees bring in billions of dollars for banks, and they aren’t going to stop looking for ways to raise them — no matter how profitable they are.

On The Lookout For More Fees

No, you probably won’t see debit usage fees anytime soon. But you might see other attempts to raise revenue from fees. Here are some items to look out for the next time you receive a bank statement or other communication from your bank (you should read everything your bank sends you):

• Hikes to current fees: Be on the look out for increases to existing fees. ATM fees might go up by $1, or you could see a small increase in your monthly checking account fee. For free checking accounts, you might become subject to an activity minimum, or a balance requirement. These small changes don’t make as big an impact in the media, but they can affect you.
• New, smaller fees: Perhaps you are going to be (quietly) charged a small fee for paper statements. If yo make transactions via phone, a fee might be added. These new fees are likely to be small and somewhat unnoticeable, but banks are hoping they will add up.
• Credit card changes: Instead of hiking bank fees, some institutions are likely to look for revenue increases from other products, like credit cards. An interest rate increase to your credit card issued by your bank, or perhaps the addition of an annual fee, might be considered in order to help raise more revenue.
• Reduced perks: Sometimes, banks look to boost positive cash flow by cutting back on perks. You might not see an increased fee, but banks are increasingly getting rid of debit card reward programs. Other perks, like free notary services, might also disappear for bank consumers.
• Lower deposit yields: And, of course, in order to boost revenue some banks might decide to reduce the yield they pay on deposits. Interest yields are being cut on savings accounts, money market accounts, HSAs, CDs and interest checking accounts.

In the end, banks are for-profit businesses, looking to make money. You have to be on your toes constantly if you expect to stay ahead, and get the most value for your money.