Charged overdraft fees? Request a refund
Matt Benevento was surprised when his bank sent him an alert stating that he had incurred four overdraft transactions on his account and had received over $ 100 in overdraft fees.
âIt seemed like they were making me pay so much money for a one-time mistake,â he says. But Benevento, a search engine optimization strategist who lived in New York state at the time, had worked with his bank for years and wondered if it could be lenient with him. He says he called the bank‘s customer service and asked if they could waive the charge.
It worked. âThey authorized the refund because it was my first offense and because I’m generally a good customer,â says Benevento. His advice to someone else who’s been charged an overdraft fee? Ask if the bank will waive all or part. âIt never hurts to ask,â he says.
How to request a refund from your bank
Some banks have published fee waiver policies and may automatically waive certain overdraft fees based on certain conditions. But even if there’s no formal policy, it’s always worth asking if your bank will waive the fees, says Jesse Bradin, a financial advisor in Raleigh, North Carolina.
âYou have to be your best lawyer,â Bradin says. Call the customer service line, explain that you have an overdraft charge, and ask if the charges can be waived, he says. It can be that easy.
If your charges are reimbursed, you will still need to make a deposit to your account to cover the negative transaction.
Understanding the overdrafts
Overdraft fees are charged when a customer is enrolled in overdraft protection, giving their bank or credit union permission to process a transaction even when there is not enough money in it. the bank account to cover it. The institution typically charges a fee for this service. Many large banks charge $ 36 or more per transaction – sometimes multiple times a day – which sends the account balance even more into negative territory. The costs add up.
Overdraft protection for debit card purchases and ATM transactions is optional. Withdrawing means that your transaction will be declined if there is not enough money in your account to cover it. This can be annoying, but it could also save you the expense of several overdraft fees.
Banks earn billions of dollars a year in overdraft fees. The biggest banks collected more than $ 11 billion in overdraft fees in 2019, according to the Center for Responsible Lending. With overdraft fees, customers end up owing their bank a lot of money at a time when they are least likely to be able to afford it, Bradin says.
The consequences of overdrafts
The cost of the overdraft fee goes beyond the fee. The bank may close your account if it is negative for too many days. When a bank closes your account due to unpaid charges, it will likely notify a consumer information agency, such as ChexSystems. And if you have a ChexSystems case, you ârisk being kicked out of the banking system,â Bradin explains.
Without access to a bank account, you may need to use paid check cashing services to access your paycheck or reloadable debit cards that charge cash deposits. Overall, it’s best to try and keep a bank account open, Bradin says.
Ways to Avoid Future Overdraft Fees
While banks can sometimes waive overdraft fees, it’s usually best to avoid overdrafts to begin with. Here are the steps you can take now to avoid overdraft charges in the future.
- Associate a backup account. Many financial institutions allow you to link your checking account to a backup account, such as a savings account or a line of credit. In the event of an overdraft, funds are automatically transferred from the linked account to the current account to cover the overdraft. Some banks don’t charge for this service at all, but others do (usually around $ 12). If you partner with a line of credit, you will likely have to pay interest on the transferred funds, with an annual percentage rate of up to 18% or more.
- Sign up for balance alerts. Your bank may offer to send you an alert by SMS or email if your balance drops below a defined amount. You can then determine if you can limit spending or transfer funds from another account before your account goes into negative territory.
- Switch to a cheaper bank or credit union. Some institutions, especially online banks, don’t charge overdraft fees at all (although you do have to make a deposit to bring your balance back to a positive amount). And credit unions generally have lower overdraft fees than large banks. Other institutions have programs that may allow you to withdraw your account up to a certain amount at no cost, provided you meet the eligibility requirements.
- Disable overdraft protection. If you go this route, debit card transactions and ATM withdrawals that would plunge your account into negative will simply be refused. But you won’t escape all costs this way. Bounced checks can result in insufficient funds charges, which can often be as high as the bank’s overdraft fee. In addition, the business or person to whom you wrote the check may charge a fee if a check is returned unpaid. You will need to pay close attention to your balance whether or not you opt for overdraft protection.
Overdrafts can be a big source of money for banks, but they don’t have to be a waste of money for you. If you are billed for an overdraft, request reimbursement of these charges. This can be a quick way to restore your account balance so that you can focus on preventing or reducing these charges in the future.
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Margarette Burnette writes for NerdWallet. Email: [email protected] Twitter: @Margarette.
Does the item charge overdraft fees? Requesting a refund originally appeared on NerdWallet.
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