How to get your bank to waive overdraft fees – Forbes Advisor

Overdraft fees on a personal checking account probably aren’t of concern to Jeff Bezos, for example. But it’s easy for the rest of us to lose track of how much money is in our checking accounts and then be presented with a check, ATM transaction, or automatic bill payment that exceeds the balance. Account. Due to the way banks process transactions, even if you pull out your phone and check your balance while standing at the cashier, you can still accidentally charge fees that overtax your account.

When this happens, many banks charge you overdraft fees. This fee, usually around $ 30, may be charged even if the check is for a lower amount. It can be very annoying to have something like a $ 2 monthly fee for a cloud storage subscription that generates an overdraft fee of 15 times that amount.

If multiple checks or payment charges are presented on the same day your account balance hits its lowest level, you could end up paying hundreds of multiple overdraft charges. Although there are additional rules for ATMs and debit cards, banks may also charge you if you use any of them when your balance is low.

Such is financial life. And overdraft fees are an important fact of this life. Banks recorded $ 30.8 billion in overdraft revenue in the third quarter of 2020, according to a December 2020 report by economic research firm Moebs Services. Interestingly, this represents a remarkable drop of $ 4 billion from the same figure in 2019, according to Moebs.

The company has also noticed a downward trend in overdraft fees, with many banks now only charging $ 20, although the median price is around $ 30. Moebs’ explanation is that clients vote with their wallets and express a preference for institutions that charge lower fees.

You may find that an online bank charges significantly lower overdraft fees than a traditional bank. Councilor Forbes Current account fees survey 2020 found that the average overdraft fee at traditional banks and credit unions was just over $ 29, while online banks showed an average of a bit more.

Overdraft fees seem unlikely to go away, although they have declined somewhat lately. But even if you’re not in the Bezos league, there’s a lot you can do to avoid contributing to this banking bonanza.

Let’s take a look at the basics of overdraft fees first. Next, let’s talk about what you can do if you’ve ever had to pay a $ 30 fee – or worse, several of them – and how you can avoid that fee in the first place.

Overdraft fees: the basics

Legend has it that the first overdraft fee was charged in 1728. It was at this point that a merchant in Edinburgh allegedly convinced the Royal Bank of Scotland to let him pay the right to temporarily spend more money. that, strictly speaking, he had none on his account. Whether this is viewed as an overdraft fee or a short-term loan against collectibles is debatable. The point is, overdraft fees or things like that have been around for a while and have evolved.

One thing to understand is that overdraft fees are only assessed when the bank or credit union pays the fees that caused you to exceed the limit. It is common practice. However, the institution can refuse to pay the fee. Then you will be charged an “insufficient funds” or NSF fee. NSF’s fees are likely to be roughly the same amount, but they can cause a lot of trouble and potentially cost you more than an overdraft fee.

For example, in addition to the bank’s NSF fee, the merchant may respond by charging you some fee. If it’s a credit card, you could be hit with late fees and a punitive interest rate. Your credit report may start to show overdue payments, which could lower your credit score and increase your cost of borrowing for years to come.

Banks and credit unions do not have to pay fees charged on overdraft accounts. If you used an ATM or debit card to make the charges, under federal law they wouldn’t pay them at all, unless you opted for an overdraft protection service. Of course, there is often a charge for the service. And, while the average fee for an overdraft is around $ 30 per trade and, as noted, going down, there are no regulatory limits on what banks can charge.

Even if your financial institution charges lower than average fees per transaction, the fees can have a significant impact. For example, the bank is not required to process transactions in the order in which they were made. So, if a large charge you made yesterday puts you in overdraft mode, a small transaction the day before may also incur additional overdraft charges. This can add embarrassment to spending when you see charges accruing for charges that would not have gone over the balance or had no charge if presented in the order in which they were made.

Force your bank to waive overdraft fees

It might not be that difficult. The main thing to understand is that if you have been charged an overdraft fee and you do not want to pay it, you should ask your bank to waive the charge. Many banks are understanding and, for the most part, know the value of helping customers on this issue.

There are many mitigating circumstances that can lead to an overdraft even when the economy is not in a pandemic-induced recession and unemployment is not widespread. At the onset of the Covid-19 crisis, lawmakers urged banks to stop charging overdraft fees due to the financial stress that characterized 2020. No laws were passed, but billions less in overdraft fees. overdrafts were collected quarterly, even without a ban. Banks seem to survive without this money and may be particularly willing to waive overdraft fees when times are tight.

So, the first step to getting out of an overdraft fee is to invoke extenuating circumstances. Call your bank’s customer service department and describe the situation that brought you to this sad point. It could be a deferred deposit, a charge that landed earlier than expected, or the automatic payment of a credit card balance that turned out to be bigger than you thought.

Emphasizing that you are a loyal customer who doesn’t do so often is also a good idea.

If the customer service representative claims they don’t have the authority to waive the charge, ask to speak to a supervisor or other decision-maker.

If you are calm, reasonable and persistent, you have a good chance of being exempt from the fees. Often it is enough to ask. What if, in the end, they didn’t waive the fees? You may want to consider change bank. Banks publish their overdraft fee policies and procedures, and you can probably find one that looks nicer.

If you think you’ve been treated badly, consider complaining to regulators. the Federal Deposit Insurance Corporation (FDIC), a government agency that protects consumers’ bank deposits from loss, has a hotline — 1-877-ASK-FDIC — that you can call to find out how to contact your bank’s federal regulator.

Techniques to avoid overdrafts

There are many ways to avoid or limit overdraft fees. You may be able to link a savings account to your checking account so that the bank or credit union will withdraw funds from the savings account if the checking account goes to zero. Many banks offer overdraft protection which works like a line of credit, so you take out a small loan to cover overdraft amounts. You may be able to connect your checking account to a credit card to achieve a similar effect.

You can also carefully monitor your account to avoid being overdrawn. It’s easier with the almost universal ability to check balances and transactions online from a smartphone. But remember that you can always miscalculate because you don’t know when the charges will arrive at your bank.

Banks don’t have to alert you if you are overdrawn and accumulate charges.

However, if you carefully monitor your balance, you may be able to make a security deposit, putting more money in the account to prevent it from going overdrawn. You will have to do this on the day of the overdraft. However, bank policies may vary in this regard. Ask your bank what they are doing.

Another strategy is to keep more money in the account so that an overdraft is unlikely. This flies in the face of many personal finance tips that say excess funds should earn interest instead of avoiding fees. At current savings account interest rates, you won’t earn much interest anyway, so you might not want to leave an excessive amount. money in your checking account.

Someday, in the not-so-distant future, it is reasonable to hope that the Covid-19 pandemic will be a thing of the past. Not so overdraft fees. After nearly three centuries, it has resisted all eradication efforts. However, if you do end up with a case of it, the remedy is often refreshingly simple – just ask.

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