Recent polling found that millions of consumers are surprised by overdraft fees on their checking accounts each year. Better Business Bureau® (BBB®) advises consumers to familiarize themselves with their bank or credit union’s policies so they aren’t taken aback by a preventable expense.
In a recent Consumer Protection Financial Bureau (CFPB) report, over a quarter of respondents said that someone in their household was charged an overdraft fee or nonsufficient fund (NSF) fee within the past year and most households did not expect the fee.
Each bank or credit union has its own policy on overdrafts when a consumer withdraws more cash than is currently in their checking account. Many financial institutions will provide a line of credit to cover the charge when this happens, but they may charge the customer an additional fee.
The current average overdraft fee is $26. If a consumer isn’t carefully tracking their finances, a $5 purchase could end up costing five times what they expected.
BBB’s tips for handling overdraft fees:
● Know your bank or credit union’s policy. Ask your financial institution if they have a plan to cover overdrafts, how the plan works and if there are fees for the service. See if the bank or credit offers a grace period for overdrafts. Some will waive the fee if the customer brings their account back to positive within a certain period, like 48 hours.
● Consider opting out. Your bank or credit union may offer the option to opt out of overdraft coverage – so if you overdraw, you won’t be charged a fee, but the payment will not go through. You can also ask if it’s possible to link your savings account to your checking account so your own money will cover the overdraft rather than the bank’s.
● Track your budget carefully. If your bank or credit union is one of the roughly 91% that charge overdraft fees, you’ll want to keep an eye on your balance to avoid running out of funds in your checking account. Ask your financial institution if you can receive alerts when your balance falls below a certain amount. Check out BBB’s tips for creating and sticking to a budget.
● Know your autopay schedule. Many people use autopay to schedule their bills or other payments. Keep track of the scheduled dates for any automatic payments to make sure they don’t overdraft your account.
