These 8 banks have eliminated or reduced overdraft fees

It seems that some banks are finally ending an unpopular practice: charging overdraft fees. A overdraft fee is a financial penalty imposed by your bank when you spend more money than you have in your account. Some banks offer overdraft protection, which covers your transactions when you have insufficient funds by automatically transferring money from a linked account, such as a separate savings or credit account. But not all banks will help you protect against overdrafts – and many will charge a fee for this service.

Overdraft fees have become abusive enough to attract the attention of some of Capitol Hill’s top officials, including U.S. Senator Elizabeth Warren, who sparred with JP Morgan Chase CEO last year over the charge. convenient. Additionally, both houses of Congress proposed bills last year to limit overdraft fees, which can be charged multiple times a day. In 2020, banks collected $12.4 billion from consumers in overdraft fees alone, according to the annual spending report by the Financial Health Network.

In response to this widespread criticism – and to competing online banks that already reduced these fees years ago – a few major US banks, including Capital One, Wells Fargo and Bank of America, have announced that they are limiting or eliminating overdraft fees this year.

Not all banks are equal. So, as we continue to monitor this change, here are six banks that have ended overdraft fees, followed by two banks that have reduced them.

Capital one

Capital One eliminated overdraft fees starting Jan. 13 this year, replacing the old practice with what the bank calls “No-Fee Overdraft” protection.

No-Fee Overdraft Protection will allow you to overdraw your account without incurring any fees, but once you do, you will need to deposit money into your account to cover the overdraft. If you attempt to use your card once after it has been overdrawn but before you have credited your account, the transaction will be declined.

There is no hard cap on the number of overdrafts, but there will be a dollar limit on the amount you can overdraw on your account. This dollar amount will be based on your personal circumstances, as Capital One says it will continually assess “the client’s deposit history and risk profile,” according to the spokesperson.

If you are currently enrolled in that bank’s overdraft protection program, you should have been automatically enrolled in free overdraft protection. If you have not registered for the service, you can register at any time.

To discover

Discover is another bank with no overdraft fees. This bank has a free overdraft protection program, but you will need to link a savings account or money market account to your debit account to be able to overdraw.

And while on paper Discover limits overdrafts to six per calendar month per account, Discover also says it doesn’t currently enforce those rules, meaning you can overdraft more than six times on a more than occasional without running the risk that Discover closes your account. .

Carillon

Chime’s free overdraft protection service is called SpotMe. This service is optional, meaning you will need to sign up for the service if you are not already.

It is available to members who make a direct deposit of $200 or more each month into their checking account. Although the service says you can withdraw up to $200 per month, initially you will only be able to withdraw $20 on debit card purchases and cash withdrawals. Later, you may qualify for the upper limit of $200.

According to Chime, your eligibility for this higher limit depends on your “Chime account history, frequency and amount of direct deposits, spending activity, and other risk-based factors.”

Ally

Ally initially got rid of overdraft fees in response to COVID-19 in 2020. Ally refunded fees that had accrued at that time, but she decided to just say goodbye to overdraft fees after that. .

At Ally, you can overdraw your account without incurring any fees. You will have six business days to bring your account back to a positive balance. If you haven’t increased your balance yet, Ally will work with you to find a solution, and withdrawals from your account may be limited.

You can also sign up for a free, optional overdraft transfer service: Ally will transfer money from a linked savings account or money market account in $100 increments. This service limits such transfers to six withdrawals per statement cycle.

Suction

Aspiration’s “Pay What is Fair” commitment refuses to let you hit with unexpected charges, including overdraft fees. So, as an Aspiration customer, you’ll never have to pay for overdraft on your account – but it’s not a free overdraft service.

“We are generally able to prevent check processing, ATM withdrawals, debit card purchases or online transfers when our members do not have enough funds in their account to cover them,” said said Andrei Cherny, CEO of Aspiration. “If there is an accidental overdraft on an account that puts it in negative, customers have a period of time to make their accounts positive.”

In other words, you will have a grace period to bring your account back to a positive level if any overdraft charges manage to pass.

Truist

A new bank resulting from a merger between Suntrust and BB&T, Truist plans to launch two new no-overdraft checking accounts this summer as part of its new Truist One Banking. Rather than customers racking up overdraft fees, Truist One Banking will issue a negative balance buffer of $100 to those who persistently deposit $100 or more for two consecutive months.

If you are currently a Truist customer, you will have the option of opening a Truist One checking account, although you will not be automatically migrated.

Even if you don’t sign up for Truist One Banking, Truist also plans to eliminate most overdraft fees for existing accounts, including returned items, negative account balances, and overdraft protection transfer fees. discovered, according to Arijit Roy, head of strategy, deposits, small businesses and analytics at Truist.

Bank of America

In January, Bank of America announced that it would reduce its overdraft fee in May from $35 to $10 per overdraft transaction. In addition to reducing these fees, the bank will also eliminate the $12 Balance Connect™ service fee for transferring funds from linked accounts to overdrawn accounts.

Wells Fargo

Announced on the same day as Bank of America, Wells Fargo is eliminating various fees associated with overdraft starting in March – but they are not going away completely. Although you don’t have to pay any fees when a linked account covers an overdraft, you will only have a 24-hour grace period to bring your account back to positive if you are overdrawn.

Admittedly, like Bank of America, this move is an improvement, but it looks lackluster compared to the other banks included in this list.

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