Spend

For better or worse, a new website makes it easy to crowdfund your overdraft fees

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Last week, Lou Carlyle, asked friends to donate money to his cause. It was not for an outrageous medical bill or a charitable fundraising campaign. Instead, he was attempting to recoup $300 that the bank charged him in overdraft fees.

Carlyle, 21, used a new program that rolled out Tuesday from digital bank Current called GoFundMyOverdraft. Like GoFundMe, the platform allows users to plug in their information and create a fundraising page to share with friends and family asking for donations — except this is specifically for overdraft losses.

Banks typically charge overdraft fees when you overdraw your checking account. Instead of having your debit card declined or the purchase cancelled, your bank will cover the difference and charge you an overdraft fee, usually between $30 and $35.

"Overdrafts are definitely a big issue for me — I seem to always be getting them," Carlyle tells CNBC Make It. "The idea of being able to recoup the money banks have screwed you out of was just genius."

Of course, you're not actually recovering the overdraft fees from the bank itself. Instead, friends and family are donating money. In this case, Carlyle says he estimated that his bank, JPMorgan Chase, has charged him roughly $300 over the years. "It's probably more," he adds ruefully.

The reactions from friends who received his request have been pretty positive, he says. "Some of my friends were quite stingy and laughed," he says, but at the same time, they were interested in trying it out themselves. Others lent him money to cover any temporary shortfalls and one friend even sent him funds with no intention of getting it back. He didn't raise $300, but he also wasn't expecting much.

In the past, Carlyle has been forced to ask friends to send him funds so that he could quickly get his account balance up, promising to pay them back when the money hit his account. "It's a pretty embarrassing thing to ask a friend, but sometimes you just have to do it," he says. The GoFundMyOverdraft request, on the other hand, was a bit more tongue-in-cheek.

Last year, overdraft fees alone brought in $34.5 billion in revenue for financial companies, according to financial research company Moebs Services. And these charges, unsurprisingly, are one of the most complained about bank fees. Roughly 1,200 customers have lodged complaints about overdraft policies to the Consumer Financial Protection Bureau's database during the first half of 2019.

"We at Current view this as an epidemic, and while we don't take any overdraft fees, we know not everyone uses Current," Current spokeswoman Natasha Williams says.

But you don't have to be a Current customer to avoid overdrafts, something many don't realize. Pew Charitable Trusts found as many as 70% of overdrafters (including Carlyle) don't understand that you can decline your bank's "overdraft protection" and you will not have to pay a fee. Instead your card will just be declined when you attempt to overdraw your account.

Of course, there are some restrictions. You can only opt out of overdrafts on one-time transactions made with your debit card. So if you use checks, or if you have recurring payments set up and you go over your current checking balance, you may still be charged an insufficient funds fee.

Don't miss: Americans paid $34.3 billion in overdraft fees last year—here's what to say to get them waived

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Ramit Sethi: Here's how to get the better of overdraft fees
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