Receiving overdraft fees can be upsetting, both emotionally and financially, if you are already struggling financially. An overdraft fee is inconvenient even when things are good. Even though banks may cap the number of overdraft fees they impose each day, the price can still add up, especially for frequent overdrawers. According to a 2020 report from the research firm Oliver Wyman, frequent overdrafters accrue an average of 11 overdraft or insufficient funds (NSF) fines. Overdraft and NSF fees bring in $17 billion for banks each year. However, there are ways to avoid paying overdraft penalties, particularly if you don't frequently overdraw your checking account. You may be able to keep from paying overdraft fees in the future if you have a better understanding of when banks charge them. Knowing how to communicate with your bank will help you avoid or reduce overdraft fees on the infrequent event that you go over your budget.
How Do Overdraft Fees Work?
When your bank authorizes a transaction even if you don't have enough funds in your account to cover it, the bank assesses an overdraft fee. If you write a check or use your debit card to make a purchase that exceeds the balance in your checking account, an overdraft may result. Being impacted by several transactions on the same day increases your chance of paying multiple overdraft fees. According to the Consumer Financial Protection Bureau, the median overdraft fee for the top 50 banks by market share is $34. Instead of paying for the purchase for you and assessing an overdraft fee, the bank may occasionally return the transaction to the merchant and charge you a non-sufficient funds or insufficient funds cost.How Do Overdraft Charges Operate?
Depending on your bank, overdraft fees can be pretty pricey, costing up to $40 per time. It's not necessary for the cost to be unexpected. If your account is overdrawn, you can sign up for notifications from some banks that will send you a text, email, or mobile message. The cost might also be visible when you review your billing statement or check your online transaction history. The transaction that resulted with the overdraft fee can be recorded in your online account. Since overdraft costs are assessed per transaction, if your account posts many transactions after you've gone overdrawn, your bank may charge you multiple fees on the same day. Depending on the bank, you can incur overdraft fees totaling up to $200 in a single day. You won't be charged an excessive number of overdraft fees because your bank may set a daily cap on the number of overdraft costs you can incur.Bank Overdraft Fees
Most banks, large and small, charge overdraft fees, albeit the amount and the absolute most costs per day they can charge vary. Maximum daily fees for bank overdrafts Bank Ally $0 N/A $35 from Bank of America for purchases above $14 Capital One - 0 - - Chase $34 3 Citi $34 4 Peoples Bank $37, plus $30 more on the fifth, eighth, and eleventh days that an account is overdrawn 5 Truist $36 6How to Request a Refund for Overdraft Fees
As long as you are not a repeat offender, you might be able to get an overdraft fee reimbursed by following a few simple procedures. Message Your Bank Call your bank as soon as you detect an overdraft fee has been applied. On the back of your debit card, the bank's website, or in your mobile app, you can instantly find the number. Make Your Demand Inform the bank if you want the overdraft fee waived. You may say something like, "I noticed an overdraft fee was levied to my account on [date] and I'd like to have it withdrawn." Giving the bank some context on what caused the overdraft can be helpful. For example, your pay was late, a bill was paid earlier than you anticipated, or you've been having financial difficulties. Utilize your banking history Bring this up if you have otherwise been a good bank customer and have not yet incurred overdraft fees. For illustration, you may remark, "I've been an excellent customer for a while, and I don't frequently overdraw my account. Are there any actions you can take?" Be Courteous Keep in mind that you are requesting a courtesy from the bank. A polite request can go a long way. Even if the customer support representative won't agree to waive the fee, try not to lose your temper.Advice on How to Avoid Overdraft Fees
If you have a habit of overspending, banks can be less inclined to forgive your overdraft cost. There are various strategies to prevent overdraft transactions, which will spare you hundreds of dollars in penalties and the hassle of having to request fee waivers. Before the cutoff time, make a deposit or transfer of funds: By making a deposit large enough to cover any pending transactions, you can avoid overdrawing your account. Choose a bank that doesn't impose overdraft fees because they won't charge you a fee even though they still process overdraft transactions. Create a bank balance alerts account: When your account balance falls below a specific threshold, these alerts let you know so that you can make a deposit before the deposit deadline for that day. Join the overdraft protection program. To avoid an overdraft, this feature automatically transfers funds from a linked bank account or credit card. Overdraft protection transfers may still incur a fee from some banks, but it is usually less than an overdraft fee. Credit card overdraft transfers could be seen as cash advances, which usually include paying a fee and a higher interest rate than you would for purchases. Interest on cash advance transactions begins to accrue on the day of the transaction; there is no grace period for avoiding finance costs.Questions and Answers (FAQs)
How many overdraft fees will a bank refund?
Overdraft fees may be waived by banks at their discretion. There is no assurance that they will waive an overdraft charge.When are costs for overdrafts assessed?
When a bank covers a transaction on your behalf because your account balance isn't sufficient to cover the transaction, overdraft fees are assessed. Some banks could delay charging the fee until the close of business or the next morning, giving you time to transfer funds into your account to pay for the overdraft transactions.Which bank charges the least for overdrafts?
Debit card transactions at Ally Bank, Capital One, Discover, and USAA are free from overdraft fees. Chime, an online banking service, doesn't impose an overdraft fee if your balance is $200 or less overdrawn.