Theresa Schliep thought her bank made a mistake when it notified her she had accumulated almost $250 in overdraft fees.
At the time, Schliep was an 18-year-old college student working a summer job at a New Jersey pizza eatery. She said she was shocked at the amount, a sign that her bank's $35 overdraft charges had been piling up for weeks.
Schliep had been depositing all of her earnings into savings — a responsible course of action, she thought. But after she used the limited amount of transfers available to move funds from her savings account to checking to cover purchases, her checking account swiftly dwindled to nothing.
"Overdraft protection is a misleading term, because it doesn't protect you from overdrafting," Schliep said, after paying the bank back for the charges. "It allows you to overdraft when you don't have enough money in checking so you're not embarrassed by getting your card denied."
Schliep spent much of her summer earnings paying off the overdraft fees. "What's annoying is that I incurred over $200 not because of outrageous expenses, but because I spent $5 here and there on coffee and tacos," she said.
Schliep is not alone among those who fall prey to recurring overdraft fees. Young people and minorities often pay the most in those sorts of fees, a recent study by The Pew Charitable Trusts found.
Those fees are especially damaging to people in their late teens through early 30s, such as Schliep, who make up more than a third of what Pew, a nonprofit that studies public policy issues, calls "heavy overdrafters" — those who pay more than $100 in overdraft fees a year.
Yet people in other age groups are also hit by the fees. Take Kathy Hauer, a Georgia-based certified financial planner who describes herself as someone who is very conscientious about her bank balance.
"You try to plan your cash flow perfectly, but unexpected problems and unforeseen timing can result in overdrafts for even the most careful people," Hauer said.
Pew found that overdraft fees mainly affect those making less than the national median income of about $54,000 — unsurprising, according to Susan Weinstock, director of the consumer banking project at Pew. "These people are likely to be living paycheck to paycheck to paycheck," she said.
Nearly 1 in 4 of the heavy overdrafters lost the equivalent of a week's worth of wages to fees, according to the report. Many of those choose to leave the banking system entirely as a result and now rely on even more pricey alternatives such as check-cashing storefronts, Pew found.
The fees bring in a lot of revenue for the banks. The 628 largest institutions made $11 billion from overdraft and nonsufficient fund fees in 2015, according to the Consumer Financial Protection Bureau. Although overdraft programs may be touted as a customer courtesy, they have become an expensive and risky form of credit for many consumers.
"It is being used as credit, but it doesn't come with the consumer protection that normally covers credit," said Weinstock. Overdraft fees generally also do not have annual limits, and half of all heavy overdrafters paid at least $210 in fees.
In addition, regulations on overdraft fees may not have always helped those who are being hit the hardest. For example, customers must agree to be enrolled in overdraft programs as part of federal regulations, but Pew found in 2014 that 52 percent of those who paid overdraft fees don't remember signing up for such services.
To help consumers prevent overdrawing their accounts, some banks offer text or email alerts to notify them when their balance falls below a certain amount, said Virginia O'Neill, senior vice president of the American Bankers Association's Center for Regulatory Compliance.
She also said many banks may not assess an overdraft fee for small-dollar amounts and some have daily caps on how many times a consumer can overdraw. HSBC Bank, for example, charges a $10 maximum daily overdraft fee on certain accounts.
In the study, Pew called on the Consumer Financial Protection Bureau to create a rule limiting overdraft fees. "A majority of consumers would prefer their transaction to be declined than be processed for the $35 fee," said Weinstock.
Hauer advises those who rarely overdraft to call or go into the bank, apologize and ask if it might be possible to have one or more of the charges removed. "You will probably be successful if you've rarely been guilty of overdrafts," she said. "The most they [banks] can say is no."
Beyond that, there may not be much you can do except to opt out of the overdraft feature in the first place.
"This is a huge profit center for banks and they will do anything they can to generate these fees," said Allan Katz, a CFP at Comprehensive Wealth Management Group.