4 Ways to Never Pay Overdraft Fees Again
If I had to choose between having my debit card declined at the grocery store or seeing an overdraft fee come up on my online statement — I’d take the embarrassment over the fee any day.
The average overdraft protection fee in the US is $34. Although it doesn’t sound like much, it typically happens on transactions $24 or less.
What’s worse, the Consumer Financial Protection Bureau (CFPB) claims that most consumers repay their overdrafts within 3 days.
To understand how ridiculous this is, if you were to take out a $24 loan and repay it in 3 days, a $34 overdraft fee would mean an APR of 17,000% (the average credit card APR is 13.5%).
The CFPB estimates consumers pay $17 billion annually in overdraft and non-sufficient fund fees. If you think your bank is “protecting” you, think again.
The good news is there are ways of avoiding paying any overdraft fees at all. Here’s what you can do.
1. Opt Out of Overdraft Protection
If you don’t want to get burned $34, don’t let your bank bail you out when you overspend. A lot of banks will try to convince you to sign up for overdraft protection but you can easily say no.
All that will happen is when you’re out shopping and you attempt to charge more money than you currently have in your checking account, your card will be declined.
Yes, it’s a little embarrassing but not as embarrassing as paying a ridiculous interest rate on loan from your bank.
2. Opt-In for Automatic Savings Transfers
Some banks allow you to use money from your savings account to cover the difference when you overcharge your checking account.
You have to set this up with your bank but most banks won’t charge a set-up fee for this. They may, however, charge you a small fee every time you require a transfer, but it will be much less than paying overdraft protection.
Another option is to set up transfers with a credit card or overdraft line of credit. What’s the difference? You’ll still be charged interest on the line of credit but it’ll be pennies compared to the overdraft protection fee.
3. Sign Up for a New Checking Account
You can also avoid overdraft fees altogether by signing up for a checking account with a bank that doesn’t have them. Charles Schwab Investor Checking and Chime bank are two online banks that have no overdraft-protection fees.
Schwab also offers no minimums, free checks, and unlimited reimbursement of any ATM usage.
If you travel a lot and find yourself drawing cash from out-of-network ATMs, unlimited reimbursement at any ATM is worth switching banks alone.
4. Ask for the Fees to be Waived
Yes, it’s that’s easy. If it’s a rare occurrence that you overdraw your checking account, don’t hesitate to call your bank and ask them to waive the fee right after it happens.
What a lot of people don’t realize about bank fees is they’re ALL negotiable. If you want your overdraft fees waived, call the bank and politely ask them to waive them. Here’s what you say.
[You]: Hi, I noticed an overdraft charge on my account, I’d like to have it waived please.
[Bank]: I’m looking at that right now. Unfortunately, there’s nothing I can do because blah, blah, blah.
[You]: I understand but I’ve been a good customer for X years and I’d still like the fee to be waived. This is a rare occurrence for me. What else can you do to help?
[Bank]: Hmmm. Yes, you’ve been a good customer. Hang on the line for a minute while I check with my supervisor.
[Bank]: I checked with my supervisor and he said we could waived the fee. Is there anything else I can help you with today?
Negotiating like this works.
If you’re met with some resistance, keep your cool and never show a temper. Sometimes you’ll get a no. If that happens, there are few approaches you can take.
First, be persistent. Banks spend a lot of money every year acquiring new customers so they hate to lose one. Insist on having the fee waived but do so politely.
Option two is simply hang up and try calling back. Sometimes all it takes is getting the right person on the phone.
If it sounds like the first conversation is going nowhere, excuse yourself and call back a few minutes later. Hopefully you get a different person on the phone and they’re more lenient with the policy.
If option A and option B don’t work, you might have to suck it up and pay the fee. At least if you’ve run through your options, you know you’ve given it your best shot at waiving the fee.
There’s no good reason to be paying overdraft fees. Banks will try to scare you into signing up for overdraft protection, don’t be fooled. Avoid paying altogether by following the steps I’ve laid out today.
To a richer life,
Editor, Rich Life Roadmap
P.S. I’d like to introduce you to a friend of mine, Robert Kiyosaki.
You might have heard of his book, Rich Dad Poor Dad—the number 1 personal finance book of all time.
He’s an entrepreneur, educator, and investor who has changed the way tens of millions of people around the world think about money.
His point of view is that “old” advice—go to college, get a good job, save money, get out of debt, invest for the long term, and diversify—has become obsolete advice in today’s fast-paced Information Age.
His Rich Dad philosophies and messages challenge the status quo and his teachings encourage people to take initiative to become financially educated for the world we live in today.
I urge you to check out what he has to say here…