Everyone dislikes overdraft fees. They might seem unpreventable, but there are actually a few ways to avoid them altogether.
Firstly, you can always opt out of them. Your bank or credit union can’t charge you unless you’ve already agreed to it. However, once you do this, any charges that you can’t cover will automatically be declined. You could also be charged an insufficient funds fee if you write a check or use your account for a purchase that you can’t cover.
You can also link your savings account to your checking account. By doing this, you’re providing yourself with a fail-safe should you not have enough for a transaction – your savings account will automatically make up the difference. Of course, this only works if you have or keep money in your savings account. If you don’t keep money in your savings account, or if you prefer to keep them separate, there are other options. Instead of linking your savings account, you can also link a line of credit to your checking. You might have to pay some fees, depending on the bank. Even with fees and interest, keeping the line of credit as a backup is usually cheaper than getting an overdraft fee.
If linking your checking account to other accounts isn’t appealing, you can prevent overdraft fees in other ways. A good way to stay updated is to sign up for “low balance” alerts from your bank. This could be via text or email. Then, anytime your account falls below a certain amount of money, you’ll be notified. You’ll be able to choose which amount triggers the alert, too.
Lastly, you can open up a bank account that doesn’t have any overdraft fees. It’s rare, but they do exist. And they’re becoming more common every day.
Banks Begin to Do Away With Overdraft Fees
More and more banks are doing away with overdraft fees altogether. For example, Capital One, Ally, Discover, Chime, Axos, and Aspiration all offer checking accounts with no overdraft fees. Additionally, some banks are taking steps to reduce the amount of the fee. Bank of America has recently announced that they’ll be reducing their overdraft fee from $35 to $10.
Overall, overdraft fees continue to increase, according to CNET. The average fee today is $33.58. It’s no secret that banks profit off of working-class people every day, and this is just one of the many ways how. In fact, overdrawing accounts often happens to those that can least afford the fees it comes with. 9% of all US consumers overdraw their account more than 10 times a year. According to the Consumer Financial Protection Bureau, that 9% of consumers accounts for roughly 80% of all overdraft fees collected each year.