If you don’t keep a close watch on your checking account balance, making a debit purchase or writing a check without enough funds in your account to cover it could end up costing you. The average overdraft fee hovers around $33, and your bank could charge you multiple fees in one day.
It’s bound to happen to you at some point. Maybe a deposit you were waiting on didn’t clear as quickly as you expected, or you simply weren’t paying attention to your balance. Everyone makes mistakes once in a while, but is there anything you can do to reverse the charge?
What Is an Overdraft?
The available balance in your checking account is essentially a spending limit; you’re not supposed to spend more than what you currently have on deposit. “An overdraft occurs when you try to withdraw more money than what you have in your account, making your account balance negative,” says Leslie H. Tayne, a New York-based debt resolution attorney and personal finance expert. This can happen if you swipe your debit card, pull cash from an ATM or write a check for an amount larger than your balance.
If you decide to opt into debit card and ATM overdraft, your bank will allow you to withdraw money even when you don’t actually have it. “Basically, the bank lends you the money to cover the shortfall,” Tayne says. However, that favor comes at a cost. Most banks charge an overdraft fee every time a transaction results in a negative balance, up to a limit (six per day is common). That can add up to quite a bit of money.
How You Can Try to Get Your Overdraft Fee Waived
The good news is that if you are hit with an overdraft fee, you might be able to have it reversed. “Most financial institutions are very forgiving when it comes to these fees,” says Laura Sterling, vice president of marketing for Georgia’s Own Credit Union. “Most financial institutions will refund the fee – as long as it is not a normal occurrence. We all make mistakes.”
That said, it’s not a guarantee. To get your overdraft fee waived, you’ll need to do a bit of negotiation. Try taking these steps:
- Call your bank. Contact your bank as soon as you realize you’ve been charged an overdraft fee. You can call the number on the back of your debit card to speak with a representative, who may be able to help.
- Explain what happened. Give a few details as to why you overdrafted. Perhaps an unexpected transaction hit your account at a bad time, or you’ve been experiencing financial issues due to a job loss or reduced income.
- Provide a timeline. Say how soon you plan to get your account balance positive again.
- Point out your history as a customer. Note that this is a rare occurrence and you’ve been a longtime customer (as long as it’s true, of course).
- Always be polite. Stay calm and avoid arguing or raising your voice.
- Get a second opinion. If the first person you talk to isn’t helpful, ask to speak with a supervisor.
- As a last resort, try this. If your bank is unwilling to help you out, say that you plan to take your business to another bank once your fees are paid up. It might be the final straw to get your overdraft fee waived.
Keep in mind that if overdrafts are a frequent occurrence, it probably doesn’t matter how polite or persistent you are. Banks will usually only waive fees once or twice.
How to Avoid Overdrafts
One of the easiest ways to avoid overdraft fees is by signing up for overdraft protection, Sterling says. This involves linking another account at your bank – usually a savings account – to the checking account. If you overdraw, funds are pulled from the linked account to cover the difference. The bank will likely assess a fee, but it’s usually much smaller than the overdraft fee.
“Beyond signing up for overdraft protection, the easiest way to avoid a fee is to maintain a checking account register,” Sterling says. Anytime you authorize a debit from the account, record it and maintain a running balance. This allows you to keep a record of how much money is in your account and avoid a transaction that could cause an overdraft.
If the idea of keeping such detailed records of your checking account balance seems cumbersome, another option is to set up account alerts. Most financial institutions can email or text you if your account balance falls below a certain threshold that you designate.
Finally, consider opting out of overdraft coverage. In this case, your bank will simply decline any transactions that you can’t cover with your account balance. It may set you up for an embarrassing situation at the register, but at least you won’t be charged any fees.
Your Choice of Bank Could Be Helpful
If your bank charges high overdraft fees, you might want to think about switching to one that doesn’t charge them at all, or at least makes it easy to avoid them.
For example, Ally Bank recently announced that it would no longer charge its customers overdraft fees. Now, smaller transactions will be allowed to go through, while larger ones may be declined.
Other options for overdraft fee-free banking include Capital One’s 360 online checking account, which offers overdraft protection at no cost, and Chime, an online platform that allows some customers to overdraw up to $200 with no fees.
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