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Overdraft Fees & Transaction Reordering Explained | Broke Millennial Author Erin Lowry - YouTube
Channel: Rachael Ray Show
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One of the things I like for you to do
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is track how much you're spending.
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You wanna pull your bank statements.
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You wanna pull your credit card statements.
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But an easy way to do it is set a text
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or an email alert.
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So first you should get an alert
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whenever you make a transaction.
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But the other thing is it alerts you about fees.
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And a big one
That's right.
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is these guys' over draft fees.
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Because let's say that what happens.
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There's something called transaction reordering
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that we wanna talk about so you wake up this morning
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you have a hundred dollars left in your checking account.
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And you say hey I'm gonna go out and buy my morning latte.
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Then I'm gonna go get groceries for 70 bucks
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and then then I'm gonna put gas in the tank.
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You're getting paid tomorrow you're not concerned.
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But you forgot that your gym membership hits today
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and that's $50 so boom, you've gone overdraft.
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Now typically, that's a one time fee of $35.
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But what can happen is the bank can actually
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change the order from chronological to largest to smallest
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on your transactions so now what's gonna happen
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is it's gonna say first you bought groceries.
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Whoa!
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Then the gym, then the gas, then morning latte
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now you've got three overdraft charges in a single day.
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Wow!
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I know what your question.
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That is tricky, nasty business.
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And technically under Federal law it is legal.
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Your state might regulate it but it is technically legal.
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So what I want you to do first have those alerts
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keep an eye if this happens to you.
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If it does, call your bank, see if you can get it reversed.
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Right.
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The other thing is shop around.
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See if maybe there's another bank that doesn't do this.
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That has no fees or less fees.
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Yes and the other thing too with those monitoring
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is fraud and I don't know about you.
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Opf!
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I have been hit with some brutal fraud.
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So many times.
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Yes.
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So many times.
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I've had to change my, I try and just use a card
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that I have to pay off every month.
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I have had to change it as many as three times in one year.
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That's a lot.
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I had $600 stolen out of my checking account
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because my debit card went
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and had some fraud on it.
Wow.
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But the big thing is you have to alert them immediately.
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That's right.
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You have about 48 hours, two business days
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to let them know otherwise you could be liable
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for $500 of those fraudulent charges
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and then after that if you wait more than 60 days
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you could be liable for all of it.
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So I want you--
Wow!
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to let them know A.S.A.P.
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Immediately.
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And that's why you wanna get those alerts.
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Is 'cause you're like excuse me I am actually napping.
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(audience applauding)
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All right let's talk about debt.
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Yes.
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(audience applauding)
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Moving into debt.
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Now I'm sure a lot of us or all of us
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probably are familiar with the credit score.
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So that's kind of a number that we talk about a lot.
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Sure.
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But another important one is the debt to income ratio
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or D.T.I.
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And this formula is monthly,
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now I have to write all pretty on the board.
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Monthly debt, and you're gonna divide that,
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by your monthly gross income.
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And then,
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my mom will be so sad about this penmanship.
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(Rachel laughing)
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But times by a hundred to get that nice percentage.
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And why this matters is because it actually really gives you
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a sense of how much more debt if any you could handle.
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Now the way to think about it.
Huh.
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Is if it comes out at 20% or less
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you're doing pretty well.
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And what these numbers represent,
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so this monthly debt, it's not your total debt.
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It's that monthly mortgage payment.
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Right.
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It's what is literally
That auto loan,
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that student loan.
going out of your house
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per month, right.
Yes.
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And this is actually your monthly gross income.
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So before taxes, before health care,
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before retirement contributions.
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Now if that number's under 20%
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it's kinda like having a 700 credit score
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you're lookin' good.
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You're lookin' hot.
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The lenders like you.
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You're lookin' good in your bikini.
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Yes.
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(audience laughing)
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And if we're at 40% or higher,
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well it might be a little bit of a red flag.
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Maybe wanna do that workout we saw earlier.
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(Rachel laughing)
Exactly.
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So that's something that you wanna consider.
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That's great.
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'Cause so many people do think just credit score.
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(audience applauding)
Yes.
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They don't even know about this.
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And lenders care a lot about that.
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Of course your credit score is important
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but this is important too.
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Well and there's so many commercials now
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I feel like the awareness of people that help you for free,
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different apps and things.
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Yes.
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That help you with the credit score.
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This one is one that's so important
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to just your mental well-being.
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Right?
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It is.
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Just like we were saying with the physical workout
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being financially sound is a huge mental load off.
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It changes your health.
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(audience applauding)
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It changes your relationships, right?
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It does and.
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You and your husband don't fight about finance
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because you're keeping
No.
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on top of it.
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Well listen, sometimes we have our kerfuffles
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everybody does, we're not perfect.
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Right.
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But the important thing is we communicate about it
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and we touch base about it on a very regular basis.
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It lifts a big burden
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to stay on top of it.
It really does.
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It does.
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Good job.
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Excellent work in the field.
Thank you so much.
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(audience applauding)
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(magical light chiming)
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