Your Bank Is Making a Fortune on ATM and Overdraft Fees!
Did you know that big banks are making billions in ATM and overdraft fees? CNN Money recently reported that three major banks racked in over $6 billion in these fees. Every dollar that a bank collects in overdraft fees is paid by a bank customer somewhere just like you.
Do you want to get the bank out of your wallet and keep your money? If you don’t want to pay them overdraft fees here is some good advice to help you keep your hard earned money!
How can I avoid overdraft fees on my checking account?
The best way, of course, is to monitor your balance so that you don’t overspend your account. Many banks allow customers to set up automatic alerts, via text or email, that warn them if their bank balance drops below a certain threshold, putting the account at risk for an overdraft.
Should I choose overdraft coverage for debit card transactions?
Banks can’t charge overdraft fees for debit card transactions unless you actively “opt in” and accept coverage. The Consumer Financial Protection Bureau recommends against opting in.
That means, however, that any debit transactions that would overdraw your account would be declined. Ms. Hackenbracht noted that Pew’s research had found that a majority of consumers (68 percent) would prefer to have transactions declined than to have them covered and incur a fee. – New York Times
More Ways To Avoid Overdraft Fees
If you don’t think it matters very much consider this:
Most big banks charge $35 per overdraft. They also reorder your checks and debit card purchases when they hit the bank so they increase the chance that you will receive an overdraft. Here is an example of how this could affect you.
If you make 4 small purchases with your debit card for fast food or milk etc adding up to $10 then on the same day have a large check hit your bank like your rent, and this particular day you miscalculated by $15, then the bank runs your rent check first when they reorder your debits and overdraws your account slightly, then you could get hit with 5 overdraft fees of $35 each! Thats $175.00!
If it makes sense to you to limit the risk of paying an overdraft fee, here are two more ideas.
Choose a Checking Account with No Overdraft Fees
If you don’t want the hassle of having to opt out of overdraft protection, switch to a checking account that prides itself on eliminating overdraft fees altogether. Mobile apps like Simple and Moven have a user-friendly online banking interface and budgeting tools, and several banks including Capital One and Bank of America offer fee-free checking options. In most cases, the bank will decline to cover the attempted charge or ATM withdrawal instead of collecting a fee. There are some tradeoffs: Most no-fee checking accounts don’t accrue interest and few offer the option to bank at brick-and-mortar branches.
Keep Money in a Linked Account
Many banks offer overdraft protection, or the option to link your checking account with another bank account so that any time you overdraw, the payment will be covered by your own funds. You’ll avoid the bigger overdraft fee, but often get charged a transfer fee ($10 is common). Some banks will also let you link your credit card to your checking account to serve as the cushion for overdrafts. But if you go that route, you’ll incur an interest charge on top of the transfer fee, unless you pay off your credit balance each month.– Investopedia
How much do you pay each year in overdraft fees?