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Overdraft Fees: What Banks Charge
It happens to the best of us: You write a check or make a purchase on your debit card only to find out later that you didn’t have enough money in your checking account to cover it — maybe you forgot about a quarterly payment coming due or your paycheck was delayed; maybe you’re just plain broke. Whatever the reason, the cost of that transaction put your checking account in the red, and once that happens, you’re going to get hit with an overdraft fee. And, if you happened to make a few more transactions before you realized what was happening, you may even rack up another overdraft fee for each and every one of them.
No one likes overdraft fees, to say the least. However, overdraft protection does prevent an even worse scenario: bouncing an important check. If your rent check bounces because your account was short by $50, you’ll not only have an angry landlord on your hand, you’ll also get hit with a bounced check fee that puts most overdraft fees to shame.
Still, when it comes to overdraft fees, not all banks are created equally. Many banks allow you to link up a savings account to minimize the damage. Sometimes you can even get overdraft fees waived, but if you rack up too many, don’t expect your bank to be sympathetic for long. So if you go over your balance, what can you expect to pay for the privilege of that credit cushion? The answer might have you shopping for a new bank.
Why Do Banks Charge an Overdraft Fee?
So why do banks charge this fee? There’s the obvious, punitive answer: They don’t want you overdrawing your account, so they make it expensive and inconvenient to do so. However, they can’t make it too expensive or too inconvenient, or you’re going to start searching for another bank.
The other answer is that it costs them money every time you overdraw your account. And, of course, they’re extending you credit and taking on some risk in doing so — there’s always the chance that you might overdraw your account and never put the money back in.
Does Every Bank Charge Overdraft Fees?
In a word, no. Some banks allow you to treat an overdraft like a loan and pay interest on it, which can be significantly cheaper, even for the rare offender. Capital One 360 and Everbank are two options for people who scoff at the very idea of paying overdraft fees.
Still other banks don’t allow you overdraft at all. However, this can often be the absolute worst deal. For example, Schwab Bank doesn’t let you overdraft, but will charge you a $25 insufficient fund fee anyway if you try — and will do so up to four times in a day. So in addition to the embarrassment of having a transaction declined at the register, you’re going to pay for the privilege.
Most banks allow you to link a second account to your checking account and take money out of that if you overdraft. However, even these banks are going to charge fees for that service, and either way, you can only do that so many times in the month before federal regulations prevent you from taking more out of your checking account.
How Much Do Banks Charge for Overdraft Fees?
Here’s what some of America’s most popular banks are charging for overdraft fees — and how many times a day they’ll charge you if you keep overdrawing your account without realizing it:
- Ally Bank: $25, once per day.
- Bank of America: $35, up to four times per day.
- Capital One 360 Bank: No overdraft fee; interest owed on overdrawn balance (currently at 11.5% APR).
- Chase Bank: $34, up to three times per day.
- Everbank: No overdraft fee; interest owed on overdrawn balance (currently 9.4% APR).
- Navy Federal Credit Union: $20, up to three times per day.
- PNC: $36, up to four times per day; plus $7 a day if account remains overdrawn for five straight days.
- TD Bank: $35, up to five times per day.
- U.S. Bank: $36, up to four times per day.
- Wells Fargo: $35, up to four times per day.