Overdraft fee

• Most common fee banks charge

• A charge you receive from your bank when you spend more money than you have available in your bank account.

• Overdraft protection

Are fees charged for every overdraft I make?

• It’s possible, depending on your bank’s policy.

  • When an overdraft occurs:  banks can choose to cover the cost as part of their standard overdraft practices without needing your consent but they can also charge a fee for that courtesy

Types of overdraft coverage and protection

• At most financial institutions, you have three choices when it comes to dealing with an overdraft:

  1. Overdraft coverage

     • the most expensive option

     • permission to pay all transactions that drop your checking account balance below zero.

     • overdraft fee - at a median cost of $34

  2. Opting out of coverage

     • decide not to participate

     • transactions that exceed the funds in your account will be rejected

     • you won’t pay an overdraft fee

  3. Overdraft protection transfer and overdraft line of credit

     • links your checking account to savings account to cover the funds you need for a transaction

     • Offered by some banks, this alternative, also called "overdraft protection," lets you link your checking account to another account, such as a savings account or a second checking account, to cover the funds you need for a transaction.

How to avoid overdraft fees

• If you regularly get hit with overdraft fees, you may want to change your approach to your banking.

• To avoid this:

  • Opt out of overdraft coverage. The bank will simply decline any transaction that would overdraft your account.

  • Keep an eye on your account balances. Set low-balance alerts on your accounts so that you’ll know when they’re at risk of overdrafting.

  • Set up overdraft protection transfers. If your bank offers free overdraft protection transfers, make sure you have another account that the bank can draw from in case your main account overdrafts.

  • Use a prepaid debit card. Prepaid debit cards give customers a set amount of money that they can draw from, so if you don’t have the funds for a transaction, it’ll be declined.

  • Call your bank to see if it'll reverse the overdraft fee.

  • Switch to a bank that doesn’t charge overdraft fees.

  
  

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