What is an Overdraft Fee?
Banks charge overdraft fees when the balance of your checking account drops too low. For most banks, there is a minimum balance ranging from $1 up to $50. If your account activity leaves your balance below this minimum, then the bank charges an extra fee.
You should know that these overdraft fees are a huge part of banks’ income. In 2020, consumers paid a total of $12.4 BILLION in overdraft fees!
Are Overdraft Fees Optional?
It’s important to note that there are two different kinds of overdraft fees. Overdraft fees can be charged on checking account transactions like bill pay, automatic withdrawals, and paper checks. Fees for debit card transactions fall into a slightly different category, and these are optional.
When you swipe your debit card for a purchase, most banks will approve the transaction and charge an overdraft fee if your balance is too low. Opting out of overdraft fees will instead cause your purchase to be declined. While you don’t get what you are trying to buy, you will save the fee, which can be as high as $40.
How Do I Opt Out?
If you do your banking with US Bank then you should be able to opt out directly from your online banking with the “Overdraft Fee Forgiven” menu. Most other banks you will need to call and speak with a person to make the change.
Be sure to hold firm when you make the call. Many banks make tens if not hundreds of millions of dollar from these fees, and some agents will fight hard to talk you out of changing your settings.
Are There Banks that Don’t Charge Overdraft Fees?
Yes! Capital One Bank announced in 2021 that they would eliminate overdraft fees entirely. Citi, Dollar Bank and Liberty Bank have also removed many of their fees including overdraft fees. Many credit unions including Alliant and Amplify waive these fees as well.
You might also consider an online-only bank if you don’t require in person services. Digital banks like Ally, Chime and Revolut never charge overdraft fees.
What if I’ve Been Charged a Fee Already?
Sometimes, all you have to do is ask. While there’s no guarantee it will be removed, a phone call with a person can often remedy the situation. If it’s your first overdraft, be sure to tell the support agent that it’s your first time. Ask them firmly and directly “can you please remove the overdraft fee from my account?”. The longer your relationship with the bank, the higher the chances are that your request will be honored.