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Fifth Third Bank Will Have Most Expensive Overdraft Fees

Fifth Third will have some of the most expensive overdraft fees of any big bank starting later this month.

The Cincinnati-based bank has confirmed that starting June 27 it will increase the cost for overdrafts. While the charge for the first overdraft of the year remains the same ($25), subsequent overdrafts will come with a $37 fee.

"We have recently made a number of changes to simplify our overdraft policy based on customer feedback," said Fifth Third spokeswoman Stephanie Honan in an email. Currently the bank charges $25 for the first overdraft, $33 for the second, third and fourth overdrafts, and $37 for every overdraft after that, with a maximum of 10 overdrafts allowed in one day.

Consumers who hit the maximum number of overdrafts in a day could rack up as much $370 in charges with the new fee structure.

RBS Citizens has a similar two-tiered tiered structure, charging $22 for the first overdraft and $37 for each one after that, according to a new analysis by the Consumer Federation of America.

While Fifth Third is raising the overall costs for an overdraft, it also is eliminating an $8-per-day sustained overdraft fee if a negative balance is not eliminated within three business days after an original overdraft.

Bank of America charges $35 per item and caps the maximum number of overdrafts allowed in one day at four. The bank charges a $35 fee after five days if the overdraft has gone unpaid, however.

Many of the big banks have been moving to increase fees this year. U.S. Bank announced last month an increase in overdraft fees as well; SunTrust bank is raising costs on its basic checking accounts and ATM charges.

Yet with all the changes in bank fees, shopping around for a new bank account is not as easy as it seems. Fee disclosures for checking accounts number 69 pages on average, according to a new report by Pew Charitable Trusts released on Thursday. The type of information available about important fees and other policies varies widely from bank to bank, according to the report. The consumer group has called on the Consumer Financial Protection Bureau to require banks to use a standard disclosure form for checking account fees.

Better disclosures would allow customers to more easily discern differences among checking accounts and find the best fit, said Susan Weinstock, project director for Pew's Safe Checking in the Electronic Age Project, in a press call on Thursday.

Consumer advocates have been especially critical of overdraft services, saying they take advantage of the poorest customers who routinely overdraft their accounts. Banks say that overdraft protection provides a kind of quick loan to customers so that they don't bounce payments with billers.

A Pew report from early May showed that 14 percent of bank customers incur an overdraft on a single account from six to 10 times per year, adding up to hundreds of dollars in extra costs. The Consumer Financial Protection Bureau said earlier this year that it is taking a closer look at the practice.

Today overdraft protection is an optional service but it has not always been that way. Until 2010, banks automatically enrolled all customers in overdraft protection, which allowed them to keep using their debit cards while shopping or at ATMs even when no money remained in their accounts. That allowed the banks to rake in billions in fee revenue.

To further increase revenue, many banks also reordered transactions so that the biggest charges cleared first, thereby draining an account of money and creating an opportunity for multiple overdrafts on multiple smaller items. In contrast, some banks clear charges in the order that they were made.

While banking regulations have successfully changed the service to be opt-in, there is no law that says that banks cannot reorder transactions from highest to lowest.

UPDATE: 5:45 p.m. -- A reader has noted that BBVA Compass Bank charges $38 per overdrafted item. The midsized bank, with branches in Western and Southern states, allows customers six overdrafts a day, with a total of $228 in fees. Fifth Third lets customers have 10 overdrafts a day, which could add up to as much as $370 in fees, according to an analysis of the 12 biggest banks by the Consumer Federation of America.