Is Overdraft Protection Real? A Look at the Big 4 Banks

IMG_3167Overdraft fees originated as a way for wealthy bank clients facing a liquidity problem to borrow money from the bank as a line of credit and pay it back with some interest. Today, overdraft fees often target those on the low end of the socioeconomic ladder, while wealthy bank clients can easily get overdraft fees waived or aren’t charged for overdraft protection. It’s easy for personal finance experts to flippantly say, “Don’t buy what you can’t afford.” But for those on the bottom of the totem pole, basic necessities need to be met, and sometimes that means overdrawing an account and in turn being hit with a fee from the bank.

What does overdraft mean?

Overdraft or non-sufficient fund (NSF) fees are charged when a customer overdraws on an account, causing it to become negative. Bank fees and thresholds for overdraft vary, but the Big 4 Banks – Bank of America, Citibank, Chase and Wells Fargo – all charge above $30. Bank of America and Chase also charge extended overdraft fees for customers who cannot get accounts out of the red within five consecutive business days. As a safeguard, each bank also offers overdraft protection.

Get a deep dive into the overdraft policies of the Big 4 Banks on US News & World Report.

Posted in US News' My Money Blog Tagged with: , ,
7 comments on “Is Overdraft Protection Real? A Look at the Big 4 Banks
  1. Amos says:

    Thanks Broke for sharing this article on overdraft.
    Amos recently posted…The Top 3 Books on House FlippingMy Profile

  2. Yup, the rich get richer.
    How to Save Money recently posted…Saving Money By Setting the Correct TemperatureMy Profile

  3. I opted out of this program at my bank so I don’t have to every worry about these fees.

  4. I believe that it is best not to depend on this option. It is best to have funds in your account to cover your expenses.

    • Broke Millennial says:

      In an ideal world, but it’s impractical. Even the savviest personal finance experts go overdraft on accident and more importantly, plenty of people use it for short-term borrowing because they have no other options. Hopefully you take a look at the full article. Of course always best to have the funds in checking, but it’s also good to have protection (by linking to savings) and with a bank that provides it for free.

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