Overdrafts and Fees

The story: Alex’s autopay surprise

Alex looks at a banking app that shows a bounced automatic payment and a fee, then adds a savings buffer.

1. Narrator: Alex opted out of overdraft coverage for debit card purchases. If there isn’t enough money, the card is just declined.
2. Narrator: Then a $25 phone-plan autopay came out on a day Alex had only $10 in checking.
3. Alex: But I opted out! How did I get a fee?
4. Narrator: Opting out covers one-time card and ATM purchases. Automatic payments and checks can still overdraft or bounce with a fee.
5. Narrator: A bounced autopay can also bring a late fee from the company that was owed.
6. Alex: So I’ll keep a buffer in checking and link my savings as a backup.
7. Narrator: Alerts on, opt out, keep a buffer.

What you’ll learn

1. Overdraft vs NSF

   An overdraft is when the bank pays a charge you don’t have money for, then charges a fee. NSF means not enough money: the bank refuses the payment, it bounces, and a fee can still apply.

2. Opt in or opt out

   For one-time debit card and ATM purchases, overdraft coverage is opt-in, so you can say no. If you say no, a purchase without enough money is simply declined, with no overdraft fee.

3. What opting out doesn’t cover

   Checks and automatic payments can still overdraft or bounce with an NSF fee. A bounced autopay can bring a late fee from the company too. A buffer in checking, or linked savings, helps cover those.

4. Read the fee schedule

   Every account has a fee schedule listing overdraft, NSF and monthly fees, and any minimum balance. Some accounts charge no overdraft fees at all. After a fee, you can ask the bank to refund it, and many say yes the first time.

Key words

overdraft

when the bank covers a charge you don’t have the money for, usually for a fee

NSF

not enough money in the account

Also called: non-sufficient funds

fee schedule

the list of an account’s fees and rules

overdraft protection

linking savings or a credit line to cover checking when it runs short

Common questions

Is overdraft protection free?

Not always. Moving money from linked savings can cost a small fee or nothing, often less than an overdraft fee. The fee schedule says.

Remember this

Alerts on, opt out, keep a buffer.

Try it: Find the fees

1. Open the sample fee schedule, or your bank’s.
2. Find the overdraft fee, the NSF fee and any monthly fee.
3. Note one way to avoid each one.

Find the overdraft, NSF and monthly fees on the sample fee schedule or your bank’s.

Live facts

Numbers that change over time, with when they were last checked and where they come from.

• Overdraft opt-in rules for debit card and ATM purchases (Regulation E)

  Source: CFPB(opens in a new tab)

• Bank account fees and your rights

  Source: CFPB(opens in a new tab)