Bank Over Draft Fees: A Guide to Understanding and Managing

Bank overdraft fees can be a surprise to anyone, and they can add up quickly. According to the article, the average overdraft fee is around $30 per transaction.

You can avoid overdraft fees by keeping a close eye on your account balance, but sometimes even the best of us get caught off guard. The article notes that overdraft fees can be triggered by a single transaction, such as a purchase or a bill payment.

To understand how overdraft fees work, it's essential to know that banks allow you to overdraft your account up to a certain amount, usually $100 or $200. However, if you go over that amount, you'll be charged a fee, which can be steep.

Managing your account balance is key to avoiding overdraft fees. Regularly checking your account and setting up overdraft protection can help you stay on top of your finances.

Intriguing read: Overdraft Online Banking

Overdraft fees can be a real headache, but the good news is that many banks are moving away from charging them. In fact, the average overdraft fee is around $29, according to Bankrate's survey.

Discover more: Regions Bank Overdraft Fees

Some banks, like Discover Bank, have been ahead of the curve by not charging overdraft fees at all. They eliminated insufficient funds fees for all of their bank accounts in 2019.

Banks like KeyBank have reduced their overdraft fees to $20 for each occurrence, and capped the number of overdraft charges at three each day. This is a big change from their previous policies.

Here's a list of some banks that have reduced or eliminated overdraft fees:

An overdraft fee is the charge a bank imposes on a customer when their account balance is lower than the amount they attempt to withdraw or pay.

These fees can range from $25 to $35 per transaction, depending on the bank and the type of account.

Banks typically charge overdraft fees for ATM withdrawals, debit card transactions, and checks that bounce.

You might be surprised to know that some banks charge multiple overdraft fees for a single transaction, if it's broken down into multiple smaller transactions.

This can result in a hefty total fee, even if the initial transaction was only a few dollars overdrawn.

A unique perspective: Bank Charge

Return to a more affordable banking experience. Some banks are now offering a 24-hour grace period to restore your account to a positive amount, giving you a chance to avoid the costly overdraft fee.

Discover Bank has been a pioneer in not charging overdraft fees, and it eliminated insufficient funds fees for all of its bank accounts in 2019.

More banks are following suit, reducing or eliminating overdraft fees altogether. Big banks, online-only banks, and credit unions are making changes to help customers save money.

If you're with KeyBank, you'll be happy to know that they reduced their overdraft fee to $20 for each occurrence in 2022, and capped the number of overdraft charges at three each day.

Here's a list of banks that have made significant changes to their overdraft fee policies:

By shopping around and choosing a bank with a more customer-friendly overdraft fee policy, you can avoid the average charge of around $29.

Some banks are moving away from charging overdraft fees, which can save you money if you accidentally overdraw your account. Discover Bank has a history of not charging overdraft fees and eliminated insufficient funds fees for all of its bank accounts in 2019.

Banks like Alliant Credit Union and Ally Bank have also eliminated overdraft fees, making it easier to manage your finances without incurring additional costs. If you do overdraw your account, some banks may cover the transaction or provide a safety net to help you get back on track.

For example, Ally Bank's CoverDraft service provides a safety net of up to $250 for overdrawn accounts of customers who qualify. If you overspend, your next deposit will be applied automatically to the negative balance.

Here's a list of some banks with low or no fees:

Some banks are making it easier on their customers by eliminating or reducing overdraft fees. For example, Varo Bank and Chime offer perks like access to direct deposit up to two days earlier than many traditional banks.

If you're looking for a bank with no overdraft fees, consider Discover Bank, which has a history of not charging overdraft fees. It also eliminated insufficient funds fees for all of its bank accounts in 2019.

Other banks are reducing their overdraft fees, such as KeyBank, which reduced its overdraft fee to $20 for each occurrence and capped the number of overdraft charges at three each day.

Ally Bank, on the other hand, eliminated overdraft fees during the COVID-19 pandemic and made the change permanent. If you overspend, your next deposit will be applied automatically to the negative balance.

Some banks are offering alternative services to help you avoid overdraft fees, such as overdraft protection, which can transfer funds from your savings account to your checking account to keep it from being overdrawn.

Here are some banks with low or no overdraft fees:

* BankOverdraft FeeAlly BankNo overdraft feeDiscover BankNo overdraft feeVaro BankNo overdraft feeChimeNo overdraft feeKeyBank$20 per occurrence, capped at 3 per dayAlliant Credit UnionNo overdraft feeBECU (Boeing Employees Credit Union)$10 per occurrenceBMO Harris$15 per occurrence, capped at 3 per dayHuntington Bank$15 per occurrence, capped at 3 per dayPNC BankNo NSF fee, but overdraft fee is $36 per day

Keep in mind that some of these banks may have other fees associated with their services, so it's always a good idea to review the terms and conditions before opening an account.

Check this out: Unavailable Funds Fee

Citigroup is a notable example of a financial institution that's making waves in the banking industry. In June 2022, Citibank eliminated fees associated with overdrafts, overdraft protection, NSF, and returned items.

This move made Citibank the largest bank to do away with overdraft fees, a significant step towards customer-friendly banking. Having a linked savings account or a Citi line of credit can enable customers to have funds transferred automatically to a checking account in the event of a negative balance.

Take a look at this: Citibank Credit Card International Fees

Regions is a bank that's made some great changes to help customers avoid unnecessary fees. They've eliminated NSF fees, which is a big win for anyone who's ever accidentally overdrafted.

One of the most significant changes is the cap on overdraft fees, which is now limited to three instances per day, and that's a maximum of $36 per day.

Regions has also eliminated the overdraft protection fee when funds are transferred automatically between linked accounts to cover overdrafts.

This means customers can have some extra peace of mind knowing they won't be hit with an additional fee when their overdraft is covered.

Additional reading: Regions Bank Sued

Santander is a bank that's made some notable changes to its overdraft fees. In 2021, it raised its no-fee overdraft threshold to $100, so accounts won't incur fees for overdrafts under that amount.

The bank also reduced the number of $35 fees that can be charged each day for covered overdrafts and returned items. This can help customers save money on fees.

In 2022, Santander took it a step further by reducing its overdraft fee from $35 to $15. This change can make a big difference for customers who occasionally go over their account balance.

Santander eliminated its $12 overdraft protection fee, which was charged when funds were moved automatically between accounts to avoid overdrafts. This move helps customers avoid even more fees.

Worth a look: Ally Bank Overdraft Fee

The Overdraft Protection Act of 2021 was introduced by former Rep. Carolyn Maloney, a Democrat from New York, to limit the dollar amount banks can charge per overdraft fee and the frequency with which the fees could be charged.

President Joe Biden has also voiced opposition to overdraft fees, advocating for a ban on "junk fees" during his State of the Union address in February 2022.

Critics of such legislation argue that consumers who overdraw an account are hurt more by having transactions declined than by overdrafting and paying the resulting fee.

Todd Zywicki, a law professor at George Mason University, questioned whether regulatory intervention might ultimately harm consumers, especially those who are more vulnerable.

If a law were in place to eliminate or curb overdraft fees, those who overdraw their accounts "will have many more bounced checks, declined payments, and will likely end up having to rely more on payday lenders and other alternative financial providers", Zywicki said.

You can avoid getting hit with overdraft fees by choosing an account with no overdraft fees. Many banks have stopped charging overdraft fees altogether.

Opting out of overdraft coverage can also save you money. According to a CFPB study, account holders who opt in to overdraft coverage have seven times as many overdraft fees as those who don't.

Covering overdrafts with a linked account can be a good option. Some banks provide overdraft protection by connecting your checking account to another account at the same bank.

Monitoring your bank account balance regularly can help you avoid overdrafts. You should check your balance when you have lots of pending transactions, such as upcoming autopayments.

Setting up account alerts can also help you stay on top of your account balance. You can set up email or text alerts when your account balance dips below a certain level or when a large transaction takes place.

If you do get hit with an overdraft fee, you might be able to get it refunded by contacting the bank. You'll generally have better luck if you're a longtime bank customer and don't have a history of overdrafts.

Repaying the overdraft quickly can also help minimize the fee. Some banks won't charge overdraft fees if you bring your account balance above $0 within a grace period—generally the next day.

To avoid overdrafts altogether, consider maintaining a cash cushion in your checking account. This can help cover any unforeseen charges and prevent overdrafts.

Consider reading: Checking Account Fee

A bank overdraft can be a costly mistake, and understanding the terms can help you avoid it. ChexSystems tracks consumer deposit accounts and reports negative marks, which can prevent you from opening a new account for five years.

If you're struggling to manage your account, you might be charged a continuous negative balance fee until you fund your account. This fee can add up quickly, so it's essential to keep a close eye on your balance.

A nonsufficient funds (NSF) fee is charged when a transaction is attempted but can't be covered by the funds in your account. This fee is also known as a bounced check fee.

An overdraft occurs when you spend more money than you have in your account. To avoid this, consider using a prepaid debit card, which allows you to load a set amount of money onto the card and prevents overdrafts.

If you do overdraft your account, you might be charged an overdraft fee, which can range from $30 to $35. Some banks may charge this fee multiple times per day if you continue to overdraft your account.

Intriguing read: Bank of America Late Fee Credit Card

Some banks offer overdraft protection transfers, which allow you to link another account to your checking account. This way, if you make a transaction that would result in an overdraft, the difference would be taken from your linked account instead.

Here are some common overdraft terms to keep in mind:

Bank overdraft fees can be a significant source of frustration and expense. Overdraft fees can range from $15 to $37, with many banks charging more than $30 for overdrafts.

Some banks charge a flat fee for overdrafts, while others may charge more for each transaction that exceeds your account balance. For example, Bank of America charges $0 - $10 depending on your account type, while Chase charges a flat $34 fee.

The cost of overdraft fees can quickly add up, especially if your bank authorizes multiple transactions that your account can't cover. To give you a better idea, here's a breakdown of the cost of overdraft fees at some major financial institutions:

Shopping around for a bank with no overdraft fee can pay off, especially if you're prone to overdrafting your account.