Monday, October 3, 2022

Which Banks Have Overdraft Protection

Don't Miss

Which Bank Has The Best Overdraft Limit

Overdraft Protection: Banks Misleading?

A close-up look at how overdraft fees work, why banks charge them, and which bank has the best overdraft limit.

Rebecca LakeApril 14, 2021

Having a bank account is convenient for spending and paying bills. But, if you get hit with sneaky overdraft fees, it can turn into quite the headache.

Good news: There are some ways to get around them. Heres a closer look at how overdraft fees work, why banks charge them, and which bank has the best overdraft limit.

What Is An Overdraft Fee

When a transaction drops your checking account balance below zero, a financial institution will choose to reject or cover the transaction. You may be charged fees in either case. The charge for a rejected transaction or check is known as a nonsufficient funds fee, while the charge for an approved transaction is called an overdraft fee. Some providers charge multiple nonsufficient funds or overdraft fees per day if you make many transactions with a negative balance, meaning you could owe hundreds of dollars in penalties.

You can read our explainer on how to avoid overdraft fees. As a rule, its best to opt out of overdraft coverage for ATM or one-time debit card transactions if you think you will have issues with overdrafts. When you opt out, the negative debit or ATM transaction will be declined and you wont be charged a fee.

If not paying your overdraft fees has gotten you placed into Chexsystems, you may want to look into opening a second chance checking account. These accounts are designed to help consumers qualify for a new checking account even with marks on their banking record.

Some providers dont charge overdraft fees if an account is overdrawn by $5 or less at the end of the business day. So if you buy a $6 sandwich with $2 in your account, you would be exempt from a fee.

If you’re looking for financial institutions with no or low overdraft fees, here are a few of our recommendations.

Choose A Bank Account With No Overdraft Fees

Instead of paying your bank $30 or more for each overdraft, you could choose a bank account that doesnt charge these fees at all. Chime, for example, offers bank accounts with no overdraft fees, monthly maintenance fees, or minimum balance fees. You can even link external bank accounts to a Chime Spending Account for added convenience.

Also Check: Expresssend Wells Fargo App

Discover Bank Cashback Debit Account

This checking account allows you to earn 1% cash back for debit card purchases totalling as much as $3,000 per month. You also dont have to worry about checking fees, since this account doesnt charge fees for monthly maintenance, insufficient funds, online bill pay, standard checks or any of its other convenient features.

Overdraft protection also does not carry fees. When you opt in, you can link your Discover savings account or money market account to your checking account, which you can use to cover your checking overdrafts. Plus, you can access over 60,000 fee-free ATMs in the U.S.

What Banks Earn In Overdraft Fees

Overdraft Protection: What Your Bank Doesn

Though many banks have eliminated or reduced overdraft fees since 2019, in that year banks collectively charged $15.5 billion in overdraft and NSF fees, according to the CFPB. More recently, various big banks received hundreds of millions of dollars in revenue from such fees during a nine-month period in 2021.

The CFPB would consider a range of regulatory interventions rather than allowing large institutions to rely on junk fees forever, the agency said in a December 2021 statement. The CFPB describes junk fees as those that are excessive, and examples include overdraft fees, return fees, late penalties and out-of-network ATM fees.

Mergers have decreased competition among banks, giving them less incentive to lower their fees, according to Elyse Hicks, consumer policy analyst at Americans for Financial Reform, a nonprofit advocacy organization. I can say with certainty, unless supervision and enforcement from the CFPB coupled with legislation to not only end overdraft fees, but create a level playing field for those living on the margins exist, banks will only rebrand overdraft fees as other junk fees and the cycle will begin again, Hicks said in an email.

Don’t Miss: Jackson Hewitt Express Refund Advance 2019

Key Features And Benefits:

  • Minimum overdraft protection of $500 up to a maximum of $4,999

  • Automatic coverage when your account is overdrawn up to your approved overdraft limit

  • Convenient repayment

    Deposits are automatically applied towards your overdrawn balance.

  • Transactions within your approved limit are covered

    Pre-authorized debits such as your mortgage, car or insurance payments, domestic and foreign ABM withdrawals Interac® e-transfers, Point of Sale purchases, cheques issued and transactions you may complete at an HSBC Branch.

  • Pay only when you use it

    A $5 fee will be charged only in the months you are overdrawn for a day or more .3

Are Business Checking Accounts Eligible For Debit Card Overdraft Service

Business checking accounts are automatically enrolled in Debit Card Overdraft Service when the account is opened. Business customers can remove or re-enroll in this service at any time at a Wells Fargo ATM , through Online Banking, with a branch banker, or by talking to a phone banker at 1-800-CALL-WELLS . Any account holder with transaction authority can add or remove the service on the checking account.

Read Also: Ebags Chase Pay

Balance Your Checkbook Regularly

Maybe you dont write checks on a regular basis, but you have a ledger.

Write your check and debit transactions in the same ledger. Once a week, compare the written transactions to the processed transactions.

There might be a discrepancy between your ledger and the current available balance if somebody hasnt cashed their check yet. Because you know you still have cash hanging out thats technically been spent already, you know theres not as much money in your account as your bank thinks.

In most cases, you have probably overdrafted your account by $20 or less. If you had balanced your checkbook on a regular basis, would you still have paid an overdraft fee?

When balancing your checkbook ledger, here are a few transactions to include in your account:

  • Handwritten checks
  • Automated bill payments
  • Direct deposits from your employer

Your bank might automatically withdraw any payments you make in their Bill Pay program, even if the company hasnt deposited the check yet. If so, this makes your task of balancing the ledger a lot easier.

Discover Cashback Debit Account

Don’t Waste Your Money: Overdraft fee changes

The Discover Cashback Debit Account does not charge for its overdraft protection that you can opt in to money is taken from your Discover savings account to cover an overdraft. There are no monthly maintenance fees, and account holders don’t need to make a minimum deposit or maintain a minimum balance. With this checking account, you can also get rewards for your spending: Earn 1% cash back on up to $3,000 in debit card purchases each month. Discover’s free ATM network includes 60,000+ Allpoint® and MoneyPass® ATMs.

Read Also: Td Bank Daily Atm Withdrawal Limit

What Cutting Overdraft Fees Means For You

Some banks that have eliminated overdraft fees now simply decline any transaction that otherwise would have overdrawn your account. If youd rather avoid having a transaction declined, an alternative may be to set up overdraft protection. This service can allow funds to be transferred automatically from your savings account to your checking to keep it from being overdrawn.

If your bank currently charges overdraft fees and you want to avoid them, its easy to find another bank that doesnt charge them, thanks to the growing list of institutions that have eliminated such fees.

Other factors consumers commonly consider when shopping for a new bank include savings account rates and whether a free checking account is offered. Various banks such as Varo Bank and Chime also offer perks like access to your direct deposit up to two days earlier than many traditional banks.

Record All Purchases Or Payments In A Transaction Register

This sounds simple , but its actually a very powerful method to stay on top of your finances.

In many ways, weve become too tech-oriented and rely too heavily on checking balances online which we then rarely do.

To avoid overdrafting your account, write down every transaction in your register. Youve got to include the little stuff because thats the stuff that comes back and gets you.

If you always know how much money you have , you will be far less likely to waste it on small purchases.

You can also use a mobile app for budgeting to do this automatically. But if youre just getting started, it may be helpful to start off tracking your everyday expenses manually before having your phone do it for you.

Don’t Miss: Wells Fargo Remittance Cost Estimator

What’s The Average Overdraft Fee

As mentioned, banks can charge overdraft fees for transactions that go over your balance. In 2020 alone, banks raked in an estimated $30 billion in overdraft fees, according to an analysis by Moebs Services.

The median overdraft fee at banks that charge them is $30. That doesnt sound so terrible if youre getting hit with the fee one time. But if you get one overdraft fee per month, that adds up to $360 per year.

According to the Consumer Financial Protection Bureau, 5 percent of people with bank accounts overdraft them 20 times a year or more. Thats $600+ each year theyre handing back to the bank in fees!

Example Of Overdraft Protection

How Can Overdraft Protection Help Your Credit?

A renter with overdraft protection and a linked account writes an $800 check to cover the monthly rent on an account that only has $650 in it. Instead of bouncing the check due to insufficient funds, the renters overdraft protection kicks in when the check is cashed.

The bank charges a transfer fee of $15 for approving a debit transaction that exceeds available funds. The renter will now have a balance of $635 and has to pay off $800 through a linked credit card, line of credit, or savings account.

Bank customers can opt in or out of overdraft protection for their checking or savings accounts.

Recommended Reading: Td Bank Atm Limits

Link Your Checking And Savings Accounts

Linking your checking account to your savings account gives you an easy way to transfer money if you think youre in danger of overdraft. You could also link a checking account to a credit card if your credit card company allows you to do so as a form of overdraft protection. But remember, this could mean paying fees and interest.

Mechanics Of Overdraft Protection

If you don’t have the funds in your checking account to cover a transaction, the bank will cover it for you in certain cases and charge you an overdraft fee.

Say you need to spend $100 with your debit card but don’t have $100 in your checking account, or maybe you have sufficient funds in your account but they’re not yet available for spending.

If you opted in to overdraft protection, the bank would still approve the debit purchase, allowing you to complete your purchase. However, your account would at that point be overdrawnthat is, you’d have a negative account balance. The bank would assess an overdraft charge and request that you deposit funds immediately to cover the $100. If you didn’t opt in, however, the bank would decline the transaction and wouldn’t charge you the overdraft fee.

The opt-in provision of the overdraft protection service only applies to one-time debit and ATM transactions. If you write a check or make a recurring payment that would overdraw your account, your bank may still pay for it on your behalf and assess an overdraft fee even if you didn’t opt in. But it may also choose not to pay for it, in which case you won’t get hit with an overdraft charge. However, you may still have to pay a non-sufficient funds fee that is comparable to the overdraft fee. You typically won’t pay this fee when a debit card transaction is declined. If a bank returns a check unpaid, you may also have to pay a returned-check fee.

Recommended Reading: Td Overdraft Policy

Fees Associated With Overdrawing Your Account Footnote *fees Associated With Overdrawing Your Account Footnote *

Overdraft Fee: You will be charged a $36 fee for each item we pay when your account is overdrawn more than $50 after all items are posted to the account. We will charge a maximum combined total of three Overdraft Fees and/or Item Returned Fees per business day., footnote 5 This fee does not apply to ATM and everyday debit card transactions unless you authorized us to pay them. This fee does not apply to bank fees and service charges that overdraw your account.

Item Returned Fee : You will be charged a $36 fee each time we return an item unpaid because your account does not have sufficient available funds to pay the item. This fee does not apply to declined ATM and everyday debit card transactions. We will charge a maximum combined total of three Overdraft Fees and/or Item Returned Fees per business day., footnote 5

Footnote * details, These fees do not apply to the BMO Harris Smart MoneyTM Account.

  • footnote 1 details If for certain reasons we are unable to return an item that overdraws your account, we will pay it and you will be charged any applicable fee associated with paying the item. If the item is an ATM or everyday debit card transaction, you will not be charged the Overdraft Fee if you have not authorized us to use our discretion to pay these types of transactions.
  • footnote 2 details Message and data rates may apply. Contact your wireless carrier for details.
  • footnote 5 details Business days are Monday through Friday except federal holidays.
  • How Does The Overdraft Protection Service Work

    CFPB Taking Action On Overdraft Fees

    Overdraft Protection can help you avoid declined transactions, late payment charges on your statements and bills, and non-sufficient funds fees. It helps you manage your finances by allowing you to complete a transaction.

    If you withdraw more than you have in your account, within your overdraft limit, the account incurs a negative balance. You can pay your outstanding overdraft balance by making a deposit into your account with the Overdraft Protection service.

    Don’t Miss: Ibc Mobile Deposit Limit

    Capital One 360 Checking Account

    Capital One 360 Checking will charge no overdraft fees or non-sufficient fund fees beginning early 2022. It currently has no monthly maintenance fees, minimum deposit or balance requirements. Account holders earn 0.10% APY and have access to its free ATM network of 70,000+ Capital One®, MoneyPass and Allpoint® ATMs.

    Youre Our First Priorityevery Time

    We believe everyone should be able to make financial decisions with confidence. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free.

    So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.

    Recommended Reading: Lightstream Boat Loan

    What Accounts Are Not Eligible For Overdraft Protection Linked To A Union Bank Credit Card

    Teen Access®, Union Bank Access Accounts, and UnionBanc Investment Services® Portfolio Connection®brokerage accounts. Only consumer Union Bank credit cards are eligible for enrollment in this service. For complete details, refer to your Cardmember Agreement and the credit card Summary of Credit Terms.

    Banks That Let You Overdraft At Atm

    Everything to Know About Overdraft Protection

    Not all banks will allow you to overdraft at an ATM, but some will:

    • Bank of America you may be able to overdraw at one of its ATMs, for a fee of $35 each time. Youll be notified at the ATM whether youre eligible to overdraft or not.
    • Citizens Bank providing youve opted into their debit card overdraft coverage, you will be able to overdraw at one of their ATMs . Youll be charged $35 for each overdraft unless the transaction is under $5, in which case, you wont be charged
    • BB& T You can opt-in to ATM and one-time debit card transactions, which means that BB& T will allow you overdraft at an ATM at their discretion. The overdraft fee associated with the BB& T Fundamentals Checking account for example is $36 for any transaction they pay or return.

    More on ATMs that let you overdraft

    Read Also: Driving Directions To Regions Bank

    What Is An Overdraft

    An overdraft happens when transactions posted to your bank account exceed your balance. In other words, your balance ends up in the negative.

    Overdrafts are problematic because they cost you money. And, over time, they can add up. In fact, banks can charge an overdraft fee for each transaction you have that exceeds your balance which means you could get charged multiple fees in a day.

    Your Overdraft Protection Alternative

    Heres the good news. You dont have to get caught up in any of this overdraft protection business. When you choose a bank, whether its a huge corporate bank or a small-town credit union, ask about their overdraft policies. Make sure youre clear on what the fees and penalties are. Make even clearer that youre not interested in overdraft protection.

    When you decline overdraft protection, youre giving your bank permission to decline transactions if you dont have the funds to pay for them. Hows that for some good ol fashioned common sense!

    But heres an even better idea. Get a better bank. Instead of trying to understand confusing bank policies designed to hurt you, choose a bank that wants to help you get out of debt, save money, and build the life youve been dreaming about.

    Thats why were building Gazelle, a new banking experience from Ramsey Solutions! Were ready to help you outrun the normal, debt-driven banking experience so you can win with your money, not lose it in stupid bank fees. If youd like to become one of the first beta users, !

    About the author

    Ramsey Solutions

    Read Also: Request Money With Zelle Chase

    More articles

    Popular Articles