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Note: Due to the coronavirus (COVID-19) pandemic, many banks are temporarily waiving or reducing overdraft fees for customers. Contact your bank for details.
Most Americans don’t spend too much time thinking about their overdraft protection. We’re often automatically enrolled in these programs without giving it a second thought.
We’re told overdraft protection allows for transactions to go through even if your account lacks funds as a convenience, but overdrafting your account often comes with hefty fees. Even worse, many banks will charge hidden fees even if you don’t actually overdraft your account.
The first time many of us even think about overdraft protection is after getting hit with a fee and naturally asking the question, ‘why can’t the banks just decline the transaction?’ Many people that have access to multiple payment forms would probably prefer this option as opposed to getting assessed a heavy fee, but aren't offered an easy alternative.
Read on to learn more about overdraft fees, from what they are and how some top banks handle them to getting them refunded and back in your bank account.
An overdraft fee or insufficient fund fee (NSF) is an amount of money that a bank charges a customer when you make a purchase for more money than you have in your checking account.
When making the same purchase with a debit card the transaction is usually blocked and no fee is charged. Overdraft fees can be viewed as a high-interest short term loan (see payday loan) that a bank extends to you to cover your purchase. For more about overdraft fees, read our in-depth overview of overdraft fees and everything you’d want to know about them.
Tip: Overdraft fees usually appear as an amount between $10 to $40. Download your bank’s mobile app and check your account balance frequently.
They usually do this in 2 ways. First by recommending that you enroll in overdraft protection. This on the surface sounds like a good thing, but this is really you giving the bank the right to charge you as many overdraft fees as you have qualifying transactions.
Secondly, banks do something called transaction “reordering” which is exactly as sneaky as it sounds. During transaction reordering “banks process large transactions first, pushing an account balance below zero, causing subsequently processed smaller transactions to then each incur a fee.
Tip: Make sure you read the fine print in the terms of your existing or new bank account to see if your bank encourages overdraft protection enrollment or engages in transaction reordering.
A lot, see Table 1.
The Short Painful Scoop on Bank of America
Visit the Bank of America full schedule of fees and their Rates and Fees FAQ for the details.
An overdraft item fee at Bank of America is charged when you write a check or make withdrawals for an amount exceeding the balance of your eligible checking or savings account at Bank of America. Bank of America pays the overdraft item anyway, resulting in an overdraft item fee at the end of the day when the bank looks at your checking or savings account. This is similar to taking out an overdraft loan.
A NSF returned item fee at Bank of America is charged when you don’t have enough funds in your checking account or savings account and Bank of America declines to pay or return the item unpaid. In this case, not only did the purchase or transaction not go through, you are also charged a $35 fee by Bank of America.
Bank of America limits the total number of overdraft and returned item fees on a personal checking or savings account to 4 in one day. However, 4 overdraft fees can still total $140 in fees per day - that’s a lot of money!
Bank of America offers overdraft protection in which you link an eligible secondary checking or savings account to your first account. When a transaction overdraws your first account, available funds are transferred over from your linked overdraft protection account to cover the amount. Overdraft protection fees at Bank of America cost $12 per transfer.
The Short Painful Scoop on Chase Bank
Visit the Chase Bank Standard Overdraft Practice page for details.
An overdraft fee at Chase happens when there’s not enough money in a Chase checking account to cover a payment, purchase, or check that you write. Their overdraft “services” comes with most checking accounts they have except for Chase High School Checking and Chase Secure Checking.
Similar to Bank of America, Chase charges the same amount ($34) for both an overdraft fee in which the overdraft is paid and a returned item fee in which the check or automatic payment is returned. These fees can occur multiple times by the same merchant, resulting in an overdraft fee and a returned item fee on the same purchase.
Chase won’t charge these fees for certain accounts like Chase Private Client accounts or Chase Sapphire accounts. In addition, if the overdraft item is $5 or less or your account is overdrawn by less than $5 at the end of the day, the bank will not charge an overdraft or returned item fee. In addition, debit transactions are not included unless you have opted Chase’s debit card overdraft services.
Chase customers can link a Chase savings account and use it as a backup account to provide overdraft protection to the checking account. All transactions can be included, including any debit card purchases. Chase does not charge a fee for this overdraft protection service but watch out for Chase’s $5 savings withdrawal fees, a Chase fee that’s applied for each withdrawal or transfer out of a Chase savings account over six per monthly statement.
The Short Painful Scoop on Wells Fargo
Visit the Wells Fargo Overdraft Services page for more details and information.
Wells Fargo defines an overdraft as a negative balance on your Wells Fargo account, resulting in the bank paying for your transaction. Similar to both Chase and Bank of America, Wells Fargo charges the same account ($35) for overdraft fees and returned item fees.
An overdraft fee happens when there is not enough funds in the Wells Fargo checking account and the bank pays the transaction anyway. A returned item fee happens when there is not enough funds in the account and the bank returns and does not pay the transaction. A transaction can be an ATM transaction, check, or a debit card transaction if you have enrolled in Debit Card Overdraft Services with Wells Fargo.
Wells Fargo has a feature called Overdraft Rewind in which if you put more money into the checking account in which you had an overdraft or returned item fee the previous day, Wells Fargo will “re-evaluate” the account today and waive any fees that were charged. This is essentially a 1 day forgiveness of an overdraft fee or returned item fee.
You can enroll in overdraft protection services in which you link up to two eligible savings or credit accounts to a Wells Fargo checking account. The bank will transfer available funds in those accounts to cover an overdraft in your checking account. Overdraft protection fees are $12.50 per transfer for savings accounts and home equity line of credits. Fees vary for credit cards.
The Short Painful Scoop on PNC Bank
Read more on the PNC Overdraft Solutions webpage.
An overdraft at PNC occurs if you do not have enough money in your account to cover a transaction, but the bank pays it anyway. PNC authorizes and pays overdrafts checks and ACH transactions as well as automatic bill payments. The bank does not authorize and pay overdrafts on ATM transactions and debit card transactions - these will result in a payment decline.
PNC charges a fee of $36 for each overdraft and $36 for a returned item, up to a maximum of 4 total per day. In addition to these overdraft fees, the bank will charge $7 per day as long as your account is overdrawn for a period of 5 or more consecutive days for a max total of $98 (this equates to 14 days). If you want PNC to authorize overdrafts for debit card transactions, you’ll need to call their number at 1-877-588-3605.
PNC offers overdraft protection which links the checking account to an eligible secondary checking, savings, money market, credit card, personal line of credit, or other debt accounts. Overdraft protection is $10 per transfer and is cheaper than paying the overdraft fees of $36 per item. When you overdraw your first checking account, PNC will transfer funds to cover the overdraft from your linked overdraft protection account.
PNC Virtual Wallet has 3 accounts - Spend, Growth, and Reserve. The Spend account comes with overdraft protection using the Growth and Reserve accounts. Overdraft protection and overdraft coverage is not available for the Growth and Reserve accounts.
The Short Less Painful Scoop on Navy Federal
Visit the Navy Federal Credit Union Overdraft summary on their website.
Unlike many of the major banks, Navy Federal Credit Union has more customer-friendly overdraft solutions. Navy Federal charges $20 per overdraft fee if the item is over $5, up to a maximum of 3 overdraft fees per day. At the end of the day, if your overdrawn balance is less than $15, there is no overdraft fee.
You can opt into overdraft protection for every type of transaction including checks, ACH, bill payments, ATM, and debit card transactions. Navy Federal does not guarantee every overdraft transaction will be paid but once you opt-in, you authorize the bank to utilize the overdraft protection services.
Your total overdrawn amount cannot exceed $500, plus any relevant fees. Navy Federal doesn’t seem to have a returned item fee - instead, if a transaction that would result in an overdraft fee is declined, it will simply be unpaid.
A Navy Federal savings account can be used as overdraft protection for free. It automatically moves money from savings to the checking account that is overdrawn. Funds must be available in the savings account and you will be subject to 6 transfers per month due to federal regulations. You can also use a Navy Federal line of credit as overdraft protection for your checking account, for free. Their interest rates range from 13.9% to 17.9% and there are no per time fees.
The Short Painful Scoop on TD Bank
For more information on TD Bank’s overdraft services, visit the TD website.
At TD Bank, an overdraft occurs when there is insufficient funds in the account. There is a $35 fee per overdraft, whether the overdraft is covered and the transaction amount is paid or if the overdraft is declined and unpaid. You can have a maximum of 5 overdrafts per day, amounting to $175. However, if you overdraw your account balance by less than $5, there is no overdraft fee.
You can enroll in overdraft services for debit card and ATM transactions by opting into TD Bank’s Debit Card Advance service. The overdraft fees and rules are the same as the normal overdraft services at the bank.
TD Bank offers Savings Overdraft Protection linking a TD savings or money market account to the checking account that’s overdraft to cover transactions up to the available balance. The overdraft protection service costs $3 per daily transfer provided there are enough funds to cover the transfer. If there is not, the overdraft fee of $35 still applies.
If you have a TD Beyond Checking account, you qualify for Overdraft Payback, in which TD Bank will reimburse you for the first two overdraft fees incurred within a calendar year. This totals to a max of $70 per calendar year.
The Short Painful Scoop on Citizens Bank
Visit the Citizens Bank overdraft options and services page for more details.
An overdraft at Citizens Bank occurs when you don’t have enough money in your checking account to cover a transaction. This normally includes checks, ACH, and bill payments and can include debit card and ATM transactions if you opt in to debit card overdraft coverage.
Citizens Bank charges $37 per overdraft, whether the bank pays for or declines the overdraft transaction. You can have a max of 7 transactions per day, totaling $259 in fees per day. Be careful about sustained overdraft fees that will hit every 5th, 8th, and 11th business day as long as your account continues to be overdrawn. Each sustained overdraft fee is $30 so it can add up to a total of $90 on top of the normal $37 overdraft fees.
You can enroll in debit card overdraft coverage by calling their phone number at 1-800-922-9999. Citizens Bank will approve at their discretion debit or ATM-related overdraft transactions at the same fees and with the same daily limits and rules as their normal overdraft coverage.
Citizens Bank offers overdraft protection through a savings overdraft transfer and an overdraft line of credit. Transactions that will overdraw your account will result in a transfer of funds from your connected savings or connected line of credit to cover the transaction. This costs $12 per transfer per day and the line of credit has separate annual fees and interest costs.
Tip: Download the Possible Finance app on your smartphone and let us do the hard work of fighting overdraft fees for you.
If you’re wondering how to get overdraft fees refunded, give your bank a call whenever you have time. Make sure your bank account is positive at the time you reach out to increase your chances of overdraft privilege.
To save you some time, make sure to have these pieces of information handy for when you get on the phone:
Depending on your bank, they may have additional verification questions for you. Once you are on the phone with a customer service representative from your bank, kindly inform them that you would like to have the fee reversed. Oftentimes, it’s as simple as asking for an overdraft fee refund. You would be surprised at how many banks will refund bank fees if asked.
During the coronavirus (COVID-19) pandemic, many financial institutions are waiving overdraft fees altogether including Chase, PNC, and more. You can learn more about the new policies in a recent US News article.
In the case of overdraft fees, a good offense is a solid defense. In order to avoid overdraft fees start by asking your banker to opt your account out of overdraft protection.
While inconvenient and expensive for many, overdraft protection does provide value in certain circumstances. It's best suited for individuals that may be more concerned about being in a vulnerable position over bills without an alternate payment method.
Whether you choose to opt-in or opt-out, make sure you read the fine print. In certain circumstances, you may opt out of your overdraft protection, but you’re still exposed to ‘non-sufficient fund’ fees that are comparable to overdraft fees.
One of the best ways to avoid overdraft fees is to sign up for mobile banking alerts that give you updates on recent purchases and allows you to see your balance in real-time.
These mobile and email alerts should also give you an automatic warning when your checking account is getting low and this is often enough to avoid any overdraft problems.
Another good tactic is to check in with your bank and see if they have any alternatives to overdraft protection. Some banks offer to pull money from a savings account up to a certain dollar amount for free.
If the problem is emergency expenses that drain your account, consider a loan from Possible.
Get up to $500 in minutes, repay in installments, and build credit history. An installment loan from Possible is a much better alternative to traditional payday loans, bank overdrafts, and payday advance apps.
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