Nearly 2 in 5 Pay $257 a Year in Overdraft Fees

by | Apr 23, 2019

At Charlie, we don’t stand for overdraft fees. In fact, we’re so against it, that we’ve decided to take a deep dive into some data and see just how much a thorn in your side overdraft fees really are.

We analyzed the top 10 banks used by Charlie friends over the course of a year starting on March 4, 2018, to see how many Charlie friends are paying overdraft fees, how much those fees are, and how often people are lucky enough to get those fees refunded.

The results will shock you.

What are overdraft fees?

Banks make overdraft fee programs sound like a helpful friend who just wants to spot you a few bucks if you overdraw your account. If you look closer, it’s not that simple. And as they say, “There’s no such thing as a free lunch.”

If you overdraw your account, rather than having the charge declined, the bank will pay the remainder of the charge for you — and then slap a big, fat, red negative number on your bank account balance. For example, say you run to Trader Joe’s and buy a $0.99 banana, but don’t have enough money in your checking account. The transaction goes through — at a price. Lo and behold: you’re charged serious $$.

But the bank doesn’t stop there. Instead, they also charge you an overdraft fee, making your account balance go even more negative than it already is. According to the Consumer Financial Protection Bureau, the median overdraft fee among big banks was $34 in 2017.

Each bank sets its own overdraft fee policy, and some banks are particularly insidious. Some charge you multiple overdraft charges for each overdrawn charge you make, up to a certain limit (generally five times per day — that could be $170!). Some even charge you an extended overdraft fee if your bank account stays overdrawn for several days in a row.

For example, if you overdraw your checking account by more than $15 at Bank of the West and don’t bring your account balance back above zero, the bank will charge you a $30 extended overdraft fee starting on the sixth business day. In total, overdraft fees can cost you several hundred dollars within a short period of time, at a point when you’re least able to pay. It’s like trying to put out a fire with gasoline.  

The icing on the cake is how banks lure you into these programs. As of 2011, they’re required to get your consent. They often do this by tagging it in fine print while you’re rushing to get through paperwork — like when you need to withdraw cash from an ATM or you’re opening a new bank account. It’s easy to hit “accept” without knowing what you’re really signing up for.

Which banks are the worst overdraft fee offenders?

Overdraft fees are more than just salt in the wound. They’re a major money-making operation for banks.

Don’t believe us? Consider this: Charlie friends spent a collective $10,549,643 in overdraft fees over the course of a year starting on March 4, 2018.

That’s over $10 million that didn’t go to paying for family vacations, kids’ college funds, or saving for retirement or emergencies.

Here’s how it panned out among banks:

 

Bank Percent of Charlie friends at this bank with overdraft fees Average overdraft fees charged on accounts with overdrafts over 12 months
Chase 44% $314
Wells Fargo 45% $224
Bank of America 49% $246
USAA 41% $193
PNC Bank 47% $324
Navy Federal Credit Union 44% $342
Chime Bank 0% n/a
Capital One 17% $116
US Bank 51% $333
TD Bank 50% $293
Other banks 35% $234
All banks combined 39% $257

 

Note: Just because you bank with one particular bank doesn’t mean you necessarily pay a ton in fees. For example, Navy Federal Credit Union is the worst offender when it comes to per-overdraft-user charges ($342 for each person who used overdraft services). If you don’t use overdraft services or don’t have a financial situation that may cause you to overdraft, this wouldn’t apply to you.

A lot of the banks on our list can be found on every street corner, so they’re very convenient. It’s possible that people looking for convenience over quality could settle for these banks. People looking for quality — i.e., better overdraft policies — may be able to take the time to seek out better (but less convenient) banks, where they won’t be slammed with overdraft fees all the time.

In other words, these numbers only prove that certain banks are correlated with high overdraft fees, not that they necessarily will cause you to have high overdraft charges. However, we believe that the blame for these outrageous fees rests mostly with the banks since they are the ones who set these policies.

Which banks are the best at offering refunds on overdraft fees?

If you play your cards right, you may be able to get some overdraft fees refunded. But again, your chances of success vary by the bank:

 

Bank Percent of overdraft fees refunded at each bank
Chase 12%
Wells Fargo 7%
Bank of America 17%
USAA 12%
PNC Bank 15%
Navy Federal Credit Union 0%
Chime Bank n/a
Capital One 11%
US Bank 13%
TD Bank 5%
Other banks 12%

 

In particular, the Navy Federal Credit Union appears to have a no-refunds policy in place. If you get charged an overdraft fee here, chances are you’re stuck with it.

Your odds of getting an overdraft fee refund at the other banks are generally low, but variable. In particular, Bank of America, despite its bad reputation does seem to offer a smidge more overdraft fee returns than other banks. (Still not much, though.)

If you’re charged an overdraft fee, there’s nothing wrong with asking for a refund. Like mom says, “It never hurts to ask — the worst they can say is no.” If you’ve been a loyal bank customer and you rarely overdraft your account, your chances of getting a refund may go up.

What can you do to avoid overdraft fees?

One of the best ways to protect yourself against overdraft fees is by canceling overdraft services. You can do this easily by contacting your bank and asking them to opt you out of the program. Be warned, however; if you do make a charge and you don’t have enough money in your account, the charge will be declined at the register and the bank will charge you a nonsufficient funds fee (NSF fee), which is usually as much as the overdraft fee itself. But, at least this will provide you with some warning that your account is being overdrawn, so you can avoid repeat overdraft charges.

It’s easier said than done, but one of the best ways to protect yourself against spendy overdraft fees is to start a budget that works for you and keep a buffer in your checking account. Most experts recommend saving up at least one months’ worth of expenses in your checking account; that way, there’ll always be plenty of money to cover any purchases you make. This can take a while to achieve, but if you work hard at it, you can do it. And Charlie can help!

Another thing you can do is to set up a low-balance alert on your account. Some banks offer this option, but if not, you can also sync your bank account with a third-party app. This will keep you safe even if you don’t budget, although it’s still a good idea to set it up regardless so that you’re not caught by any surprises.

Finally, another great way to avoid overdraft fees is by seeking out a bank that doesn’t charge them. Believe it or not, they do exist — you can even see from the charts above that Chime Bank doesn’t charge overdraft fees at all. Simple Bank is another great bank that doesn’t charge fees. Other banks, such as Ally Bank, still charge overdraft fees, but they also offer a free overdraft transfer service to move money from your savings to your checking account. These can help you limit or even avoid fees entirely as well.

Regardless of which option you choose, one thing we can all agree on is that overdraft fees should become a thing of the past. Big banks are charging millions of dollars to Charlie friends, and we’re not okay with that. We’re here to help you take back control of your finances.

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