Overdraft Protection A Trap?

(CBS)  Christopher Keeley of Brooklyn, New York figured a sure way to avoid fees for bounced checks was his debit card: if the money wasn't in his account, the purchase wouldn't go through.

But, as CBS News Correspondent Randall Pinkston

reports

, he wasn't counting on his bank's new service, courtesy overdraft protection.

"I never saw anything about that," he says. "I know for a fact I never signed anything about that."

Unlike standard overdraft protection where you sign up for it - linking your checking account to your savings or a line of credit - you don't sign up for courtesy over draft protection, the bank just does it for you.

In Keeley's case, the overdraft protection kicked in when he used his debit card to buy snacks: a candy bar and a bottle of soda totaling a bit more than $6. It was $6 worth of purchases and $31 in fees.

In one day, as a courtesy, the bank covered seven purchases totaling $230, plus a $31 fee each time - that's $217 in fees.

Compounding the problem is that when you check your balance, what you see isn't necessarily accurate because it doesn't show purchases or withdrawals that you have made, but that have not been deducted.

"People do have a responsibility to keep track of their transactions," says Nessa Feddis of the American Bankers Association. "They cannot rely on a balance that is provided to them that is not a real time balance."

The American Bankers Association says courtesy overdrafts started because many customers want them.

Feddis says most banks will limit the number of overdraft fees on a daily basis. However, some don't.

"Then, you should talk to your bank if you don't like it, you should change banks," says Feddis.

Consumer advocates say banks have gone fee crazy and in addition to the first fee, some banks tack on daily charges until the courtesy has been repaid. It's all legal and very profitable.

"We think that bounced check fees or insufficient fund fees were $11 billion in 2004 out of $35 billion in total service deposit service charges," says Kevin St. Pierre, a senior banking analyst.

Keeley's bank eventually cut his fees in half when he complained, but he's learned a lesson in debit card accounting.

"In effect, I was a bad bookkeeper," he says.

And it's those mistakes that banks are counting on.