Being hit with overdraft fees can be devastating, both emotionally and financially, if you are already struggling financially. An overdraft fee is inconvenient even when times are good.
Banks may set a daily cap on the number of overdraft fees they can charge, but even then, the fee can add up, especially for frequent overdrawers. According to a 2020 study from the research firm Oliver Wyman, frequent overdrafters accrue an average of 11 overdraft or insufficient funds (NSF) fees. Overdraft and NSF fees bring in $17 billion for banks each year.
But if you don’t frequently overdraw your checking account, there are ways to avoid paying overdraft fees. You might be able to stay away from future overdraft fees if you have a better understanding of when banks impose them. Knowing how to communicate with your bank can help you avoid or minimize overdraft fees on the rare occasion that you overspend.
What Are Overdraft Charges?
When your bank pays for a transaction even though there isn’t enough money in your account to cover it, an overdraft fee is assessed. If you write a check or use your debit card to withdraw more money than is available in your checking account, an overdraft may result. You might be subject to multiple overdraft fees if multiple transactions hit your account on the same day.
Note
According to the Consumer Financial Protection Bureau, the average overdraft fee for the top 50 banks by market share is $34.
How Do Overdraft Charges Operate?
According to your bank, overdraft fees can be close to $40 per instance, which is quite expensive. It’s not necessary for the fee to be unexpected. If your account is overdrawn, you can sign up for alerts from some banks that will send you a text, email, or mobile notification. When you look up your online transaction history or read your billing statement, you might also notice the fee. You may be able to see the transaction that led to the overdraft fee in your online account.
Since overdraft fees are assessed per transaction, if you have several transactions posted to your account after you’ve gone overdrawn, your bank may charge you multiple fees on the same day. Depending on the bank, you might incur overdraft fees totaling close to $200 in a single day.
Note
Your bank might set a daily cap on the number of overdraft fees you can incur, preventing you from paying too many.
How to get your overdraft fees reimbursed
As long as you haven’t committed an overdraft before, you might be able to get your overdraft fee reimbursed in a few simple steps.
Phone Your Bank
Give your bank a call as soon as you realize an overdraft fee has been applied. The phone number is easily accessible on the back of your debit card, the bank’s website, or your mobile app.
Specify What You Want
Your request to have the overdraft fee waived should be communicated to the bank. You could say something along the lines of, “I noticed I was charged an overdraft fee on [date] and I’d like to have it removed. “.
Informing the bank of the circumstances that led to the overdraft may be helpful. For instance, your pay was late, a bill was paid sooner than you anticipated, or you’ve been having financial difficulties.
Utilize Your Bank’s Past
Bring this up if you have otherwise been a loyal customer to the bank and have not yet accrued any overdraft fees. For instance, you could say, “I’ve been a loyal customer for many years, and overdrafting is not something I do frequently. Can you do anything for me?
Being polite
Recall that you are only asking the bank to extend you a courtesy. A polite request can go a long way. Even if the customer service representative won’t agree to waive the fee, try not to lose your temper.
Tips to Reduce Overdraft Charges
If overspending has become a habit for you, banks might be less inclined to waive your overdraft fee. You can avoid overdraft transactions in a few different ways, saving yourself hundreds of dollars in fees and relieving yourself of the stress of having to request fee waivers.
- Before the cutoff time, make a deposit or transfer of funds. By doing so, you can avoid overdrawing your account.
- Choose a bank that doesn’t charge overdraft fees because they won’t charge you a fee even though they still process overdraft transactions.
- Register for bank balance alerts. These alerts will let you know if your account balance falls below a certain threshold, which can help you remember to make a deposit before the deadline for that day.
- Join the overdraft protection program. This function prevents overdrafts by transferring funds from a linked bank account or credit card. Overdraft protection transfers are still subject to fees from some banks, but these are typically smaller than overdraft fees.
Note
Credit card overdraft transfers could be regarded as cash advances, which usually entail paying a fee and a higher interest rate than you would for purchases. Interest accrues on cash advance transactions as soon as they are completed; there is no grace period for avoiding finance charges.
Question and Answer (FAQ) pages
How frequently will a bank waive an overdraft fee?
In some cases, banks will waive overdraft fees. There is no assurance that an overdraft fee will be waived.
Charges for overdrafts are levied when?
If your account balance isn’t sufficient to cover the transaction, your bank will pay the transaction on your behalf and charge overdraft fees. You may have time to make a cash deposit to your account to cover the overdraft transactions because some banks may not charge the fee until the end of the business day or the following morning.
In which bank are the overdraft fees the lowest?
There are no overdraft fees for debit card transactions at Ally Bank, Capital One, Discover, or USAA. Chime, an online banking service, doesn’t charge an overdraft fee if your balance is $200 or less overdrawn.
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