Overdraft fees are taking $3.5 billion out of Americans' pockets that they absolutely shouldn't have to pay.

In a report released earlier this year, the Consumer Financial Protection Bureau (CFPB) found that Americans paid $15 billion in fees for bounced checks and other overdrafts in 2016. However, in an online survey conducted by Harris Poll and finance site NerdWallet in August, 66% had no idea that overdraft coverage is optional.

The CFPB data find that overdraft coverage for debit card and ATM transactions -- coverage that is optional by law -- costs the 8 million consumers who overdraw frequently each year $442 annually per person. That's more than $3.5 billion in fees in total, but $442 that would save each person$1,600 in interest and 7.5 years of credit-card debt if those same people put it toward paying off their credit card each year.

The good news is that, according to a survey by Bankrate.com, overdraft fees fell last year for the first time in nearly two decades. The bad news? The average fee declined 0.1% to $33.04, but the most common fee per overdraft was still $35. Also, increases in those fees at banks throughout the U.S. outnumbered decreases by a 5-to-1 margin.

"The average overdraft fee has been increasing year in and year out for 17 consecutive years," says Greg McBride, Bankrate's senior vice president and chief financial analyst. "I think it's too early to say that we've reached the peak, particularly because we've seen more increases than decreases."

Overdraft fees are charged by a bank when a purchase or transfer of funds by a checking account holder makes the balance fall below $0. The bank's overdraft program covers the transaction, but the account holder is charged a fee. If a transaction goes through unexpectedly, a check isn't deposited in time or an accountholder loses track of how much money they had in their account, the fee kicks in.

On average, Americans incur 2.07 overdrafts per year. Assuming a fee of $35, that adds up to $72 each year. However, that isn't where the costs end. A 2014 CFPB report found that the median transaction amount on a debit card that leads to an overdraft is $24. Add in the $35 overdraft fee, and the cost of that transaction is actually $59.

"If you're in danger of getting hit with an overdraft fee, then it's worth asking yourself if your next purchases are really worth the price that you could pay; often the answer is 'no,'" says Kimberly Palmer, NerdWallet's in-house expert on credit cards and banking.

The problem for many accountholders is that it's unclear exactly when the fee is applied. Although many banks don't charge overdraft fees on transactions of $5 and under, roughly 20% of Americans don't know that overdraft fees can be charged on transactions of less than $20. As NerdWallet discovered, banks typically charge fees on overdraft transactions from $5 to $20.

There goes your money.
There goes your money.

You can also be charged multiple overdraft fees per day. Our survey found that almost half of respondents (47%) don't know that a person can be charged more than one overdraft fee per day. However, 90% of the banks we analyzed had policies that allowed for more than one, and three in ten banks charged unlimited fees, one for each transaction that takes or keeps the account balance under $0. This is the "protection" you're signing up for when you opt into overdraft coverage.

However, you can skip it altogether. Though 66% of Americans don't know that they have to opt into overdraft coverage, a survey by Pew Charitable Trusts in 2014 found that half of people who incurred an overdraft fee didn't remember opting into the program. The Federal Reserve prohibits banks from auto-enrolling their customers in overdraft coverage, though banks can cover recurring debit transactions, automatic payments and checks without your permission. That means if a check bounces, you could still be charged what's called a nonsufficient funds fee, which may cost an amount similar to an overdraft fee.

Opting into overdraft protection isn't helpful by any means. According to the report issued earlier this year by the CFPB, "frequent overdrafters" — those who overdraw more than ten times per year — made up 9% of all the accounts the agency examined but paid 79% of all overdraft and nonsufficient funds fees. "Very frequent overdrafters" — those who overdraw more than 20 times per year — made up about 5% of all the accounts but paid over 63% of all overdraft and nonsufficient funds fees. A "median frequent overdrafter" (a person who overdraws 18 to 22 times a year) who's opted in to overdraft coverage pays $442 more in fees per year than someone who frequently overdraws and is opted out. The CFPB's included 40 million accounts, 20% of which belong to people who overdraw frequently, bringing the total for opting in to $3.5 billion.

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It's a steep price to pay for a vanity service that very few people actually want. Roughly 17% of Americans would rather take the $35 hit than lose a little face by having their card declined. However, not everyone's thrilled about letting even that small percentage pay the overdraft freigh. New Jersey Sen. Cory Booker, in letters to 13 bank CEOs, asked for details about their overdraft practices, efforts to convince customers to join overdraft protection programs and reliance on overdraft fees as a source of income.

"Millions of Americans are getting pummeled by these fees, which can create a treadmill where consumers cannot keep up," Booker wrote.

The best move if you're already signed up for overdraft services is to opt out. Considering that the Federal Reserve says 46% of Americans don't have enough savings to cover a $400 emergency, diverting $442 a year to the cause can only help. Meanwhile, with NerdWallet putting the average U.S. household's credit card debt at $6,885, it takes the average U.S. household 14 years to pay off credit card debt by making only the minimum monthly payment. By throwing in an additional $442 a year, that cuts the interest paid by $1,600 and the payoff time to 6.5 years.

"For most consumers, every dollar matters — so if you can get ahead of your payments and put down extra, you'll be giving your budget more wiggle room in the future," Palmer says. "Those extra payments could be the difference between feeling like you're getting closer to your financial goals or not."

The biggest payoff may come from diverting that $442 to investments. If you earn 7% on your investments — the average annual stock market return since 1950 — you will have saved $13,260 over 30 years just by socking away that $442. However, thanks to the combination of time and compound interest on that investment, you'll have built it up a total of $43,700. That's over $30,000 in growth alone.

There are options for fighting overdraft fees, though, even if you opt in. Researching that overdraft protection policy in advance helps, but contacting either your bank or the Consumer Financial Protection Bureau directly often helps. While banks have the option to waive fees, the CFPB may be able to help if the fee isn't waived.

Meanwhile, set up text or email alerts for low balances that make overdrafts far less likely. Build an emergency fund that you can link to your checking and use as a buffer account. Most importantly, pick institutions like online-only banks or credit unions that either charge less for overdraft fees than larger banks or forego fees altogether and simply decline transactions.

"Don't just go with the easiest option or the bank that's most familiar to you — spend some time checking out your options, because you might find the best fit for you is a bank you haven't considered using before," Palmer says.

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Editors' pick: Originally published Oct. 4.