July 18, 2019
An overdraft fee occurs when you attempt to make a payment that would result in a negative balance, so your bank covers the difference for you. They can be triggered by withdrawing cash at an ATM, writing a check, or making a purchase with your debit card. In 2018, banks collected more than $30 billion from overdraft fees. Yes, that’s billion with a ‘B’!
Overdraft fees are some of the highest fees that banks charge, usually costing around $33 to $36, and can be charged up to 7 times in one day, depending on your bank. If you end up making multiple payments in one day with an overdrawn account, this could end up costing you over $200!
Types of Overdraft Fees
Overdraft Fee
This occurs when you make a payment but do not have sufficient funds, so the bank covers the difference for you but charges a fee that ranges from $33 to $36.
Nonsufficient Funds (NSF) Fee
If you attempt to make a payment that will overdraw your account, your bank may prevent the transaction and charge you an NSF fee. These fees cost around the same as overdraft fees, which range from $33 to $36 depending on your bank.
Overdraft Protection Fee
If you transfer funds from a different bank account to avoid overdrafting, banks typically charge an overdraft protection fee. These fees are cheaper than the standard overdraft fee but can still cost you from $10 to $15, depending on your bank.
Extended Overdraft Fee
If your account is overdrawn for a certain amount of time, extended overdraft fees will be charged periodically until your balance is above $0 again. These fees vary in cost depending on you bank but typically don’t exceed $10 a day…Some banks don’t even charge them!
Overdraft Protection
Overdraft protection services, which are offered by numerous banks, allow you to connect an external source to cover a transaction that would lead to an overdraft. The external source could be a savings account, credit card, or line of credit. Also, most banks charge an overdraft protection fee whenever you transfer money to cover for an overdraft, which usually costs around $10 to $15.
Some banks, such as TD Bank, also offer debit card advances. This service covers debit card transactions when there aren’t enough funds in your account.
Other Types of Bank Fees
When it comes to overdraft services, it is necessary to be aware of any hidden fees your bank may charge you. Extended overdraft fees can sometimes occur without you knowing, so make sure you understand your bank’s process for collecting these fees so you can steer clear of them.
While some banks, like USAA, do not charge overdraft protection fees, they may still charge additional fees for excess transfers. Other banks, like Chase, charge a fee when you withdraw money from your savings account. Fees like these usually range from $5 to $15 but can vary by bank.
How Overdraft Fees Compare
Chase Bank
Chase overdraft fees and NSF fees are $34, and won’t be charged more than 3 times in one day. Overdraft protection fees are $10 and extended overdraft fees $15 every 5 days.
Bank Of America
Bank of America charges $35 for overdraft and NSF fees, which can be charged up to 4 times a day. They charge $12 for overdraft protection fees and $35 every 5 days for extended overdraft fees.
TD Bank
TD Bank’s overdraft and NSF fees are $35, and can be charged up to 5 times a day. Overdraft protection fees are $10 and extended overdraft fees are $20 every 10 days.
USAA
USAA overdraft and NSF fees are both $29, and USAA can charge them are maximum of 3 times a day. They do not charge overdraft protection fees or extended overdraft fees, but do have excess transfer fees of $10.
PNC Bank
At PNC Bank, overdraft and NSF fees are $36 and PNC can charge them up to 4 times a day. Overdraft protection fees are $10 and extended overdraft fees are $7 daily.
Wells Fargo
Wells Fargo charges $35 for overdraft fees and NSF fees. They can charge them up to 3 times a day. They charge $12.50 for overdraft protection fees, but do not charge for extended overdrafts.
Citibank
Citibank overdraft and NSF fees are $34, and can be charged up to 4 times a day. Overdraft protection fees cost $10 and there are no extended overdraft fees.
How to Prevent Overdraft Fees
The first solution to preventing overdraft fees would be to keep a close eye on your account balance. You can do this by making a budget and keeping track of your spending. By doing so, you leave less room for making purchases with money you may not have.
Another way to prevent fees is to opt out of overdraft protection. In fact, a study from 2014 shows that 52% of people didn’t even know they had turned on this service! Automatic payments are also major culprits for overdrawn accounts; we recommend that you switch any subscription services you have to manual payments. By doing so, you will be able to make sure you have enough money in your account to pay these bills.
You can also set up direct deposit in order to get your paycheck faster. By receiving your paycheck sooner, you will be less likely to overdraft between your paychecks.
Lastly, you can try signing up for Brigit. This app can help you save on average $525 in fees a year.
