I have noticed a disturbing trend with my checking account lately, something that I literally haven't experienced for years: overdraft fees. About ten years ago, these unnecessary fees were a regular part of my existence, because I didn't really keep track of how much money I was depositing, and how much I was spending.

Fast forward ten years: I am almost obsessive-compulsive about checking my bank balance, and I know how much is being spent in my household, down to the penny. So, what gives? Why on Earth is an OCD frugal guy like me getting hit with bank overdraft fees, to the tune of about $200 over the last couple of months? The answer lies within my bank itself.

The banks in my area have not been immune from the hard economic times afflicting the rest of the country. Housing starts are down about 30 percent around here, so there aren't nearly as many home loans being processed by the bank. People are buying fewer new cars, as evidenced by the desperate tone of the TV commercials being aired by the local car dealers. The bank has to get its money someplace, and they have turned to bank overdraft fees.

My paycheck is on direct deposit which means I only receive a check stub every payday. The money goes directly into my checking account. What I have noticed lately is this: the bank may receive checks (debits) roughly around the same time as my deposits. In some cases, they are showing up on the exact same day, but at other times the debits are actually coming in to the bank AFTER my deposit, but they are being subtracted BEFORE my deposit is credited. Just a year or two ago, this was NEVER the case. If deposits and debits appeared on my account on the same day, the deposit was always credited first, and then the debits were deducted from that amount.

The result of this change in banking practice is bank overdraft fees. When I wrote the checks or used my debit card, the money was in the account, but the bank is hoarding these debits until the checking account balance is low enough that when they process them, it will result in an overdraft fee...about $28 per transaction. Those fees add up quickly.

I challenged the teller at my local bank branch about these fees. "What are you people doing?" I asked, "Holding on to my deposits and running my debits until you get $28 out of me?" The teller just gave me a knowing nod and said he would eliminate the overdrafts from my account, saying he was "sorry" and that "many other people have complained about the same thing."

So, my bank is intentionally trying to overdraft my checking account. I have been a customer of this particular bank for about six years, but as soon as I locate a suitable alternative (most likely my local credit union, where I already have a savings account), I'll be giving my bank the boot. It's a sad commentary on the bank, really. They are going to lose a loyal customer (I got my car loan through them, and always pay on time) over $28 overdraft fees.

My question for them (and other banks participating in this despicable practice) is this: is it really worth it?

If you are a regular reader of Savvy Frugality, you probably know my story well by now. If you are a new visitor, here it is in a nut shell:

For many years of my adult life, I mishandled my money. In truth, I really didn't know much about personal finance or how to be responsible with my money. Medical and other bills began to pile up, and instead of facing my problems head-on, I simply threw my bills on a stack on my kitchen table and ignored them. This led to my missing a crucial letter from my bank that I was severely overdrawn on my account. All of my bill payments had bounced. While I tried to fix the problems at my bank, I paid my bills with money orders. However, I lost all of my rent payment receipts and my landlord (who was trying to turn my apartment into a condo), used this as an opportunity to claim I had never paid my rent, and he evicted my family. With no proof that I had made my rent payments, the court sided with my landlord. My family was, in essence, homeless. There were a couple of nights that I slept in my car.

In actuality, what really caused the problem at my bank was this: I made my deposit, and then wrote checks to pay my bills. The bank held back my deposit and processed the checks I had written first, overdrawing my account. Then, they deposited my check, which evaporated due to all of the overdraft fees. I had no money, and sank even further into debt.

These days, with all of the banking options available (I prefer online banks for savings, but still use local banks for checking), there is no need to live with high bank fees and nonsense like this bank pulled with me (this was about six years ago). But, what if the worst happens and you do face your own personal banking crisis? I started to think about this a couple of weeks ago at work when a client told me he would have to send me a money order for payment for his product. Without prompting, he told me his bank closed his checking account, for unspecified reasons. "I don't even have a debit card anymore," he moaned. That is when I gave him a few options, learned all those years ago when I got screwed by my bank.

1. Shop around for another institution. Banks like to tell you that since they closed your account, you can "never get another bank account again" until you pay them the fees they say you owe them. This isn't true. What they don't tell you is that you are free to open an account at a credit union. Credit unions operate a bit differently than banks. When you join a credit union, you become a "member". Basically, you own a very small share of that credit union. Credit unions aren't going to hose over their members. They want your business. When I had problems with my bank, I opened a checking and a savings account at a credit union. I used the savings account as a line of credit to get a secured credit card from the credit union. Basically, my credit limit is only as high as the amount of money in my savings account. I'm basically borrowing money from myself, and the credit union is making 9 percent interest off of my credit card balance.

2. Use money orders carefully. If you must send something resembling a check, I recommend using only U.S. Postal Service Money orders. Those money orders you buy at the gas station are provided by third parties, and trying to get your money back if a money order is lost or stolen is a nightmare. With a U.S. Postal Service Money order it is still a nightmare, but you'll eventually get your money back if the money order goes missing. Hint: ALWAYS save your receipts! Treat them like they are money, because they are. You will need these to file a claim for missing or stolen money orders, and they can be used as proof that you did purchase them to make a payment for a bill. Even better: buy a cashier's check from a bank to make large bill payments if you don't have your own checking account. It will cost you a couple of bucks, but nobody turns down a cashier's check and it is far easier to get your money back should the worst happen. Avoid: traveler's checks. Some businesses won't accept them at all.

3. Buy a pre-paid credit card. If your bank really hosed you good and you can't even get an account at a credit union, consider buying a pre-paid credit card. Usually, you have to purchase them for about ten bucks, and then you "load" them with your own cash. Some, like the Wal-mart pre-paid Visa, will even let you do direct deposit to load money onto the card. Use the card like a regular credit card. Benefits: You can't spend more than you have, because once the money on the card is used up, that's it. No more charging. Pros: Direct deposit, can withdraw cash from ATMs, no charge to get cash back at Wal-Mart stores. Cons: The cards cost $8.95, plus a $4.95 "maintenance fee" every time you load the card. However, the fee is waived if you deposit at least $1,000 a month on the card.

4. Cash is king. The pre-paid card is a good option when you must have a credit card to make certain payments (such as online payments for bills). However, don't forget that cash is still good, too. Nobody turns down cash. You can't overdraw an account when spending cash. When the cash is gone, it's gone. Cons: if you need proof of payment, you must get receipts for EVERYTHING when paying by cash.

Eventually, I got things straightened out and was able to open another banking account after some time had gone by. I even received a bank loan to buy a new car, and I have never missed or been late with one payment. Remember, your bank works for you, and you are the customer. If your bank isn't treating you right, there are plenty of other banks out there that would love your business.

Savvy Frugality Recommended Reading: The Case for Buying American

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I have to admit, I was pretty shocked when I logged in online to check my checking account statement. It said my account was overdrawn, and I had four overdraft charges totaling nearly $110. Huh? I had just transferred $500 from savings to checking the day before. This had to be a mistake. Besides, I told myself, I have overdraft protection on my checking account.

So, I drove to the bank (I prefer to handle matters like this face-to-face, not on the phone) and approached the teller. I explained the situation. It turns out the $500 transfer had not yet been credited, so indeed the account was overdrawn. "But, I have overdraft protection," I protested.

"Yes," I was told, "but that means we will pay the checks for you. You will still incur overdraft charges." I explained that this is not what I was told when I first opened my checking account five years ago, and that I was paying $12 a month for this overdraft protection. I had a "special" account. The teller then told me something that shocked me. "We have overdraft protection on our free accounts, too. The account you have gives you free checks."

Well, that doesn't mean much to me. I do most of my banking by debit card. I order checks perhaps twice a year. What a ripoff! I then turned to "super nice guy" mode. I explained that I had been a customer of the bank for five years, I have a car loan with the bank which I faithfully pay on time every month, and I had NEVER had an overdraft with this bank before, ever.

The teller called the manager over to his computer, described what a "great" customer I was, and asked if he could make the nearly $110 in overdraft charges disappear, as a courtesy. "Sure," said the manager, as if he was asked if he wanted extra ice in his Coke.

Just like that, $110 in overdraft charges disappeared. The teller also switched my checking account to free checking, with overdraft protection, which saved me an additional $12 per month. In less than five minutes time, I saved myself $250 in fees.

The lesson here is this: bank tellers listen to people complain all day long. If you encounter a problem, ask them for their help. Be nice. You may be surprised how far you'll get and how much money you may be able to save. You may have heard the saying, "you'll catch more flies with honey than vinegar." This is especially true at banks. Also, if your account is loaded with fees for services you don't use, ask for details about the bank's "free" account. Nearly every bank has one.