Feeling overburdened by overdraft fees from your bank? You’re not the only one. According to a report on overdraft fees from the Center for Responsible Learning, banks and credit unions collected over $11 billion in overdraft fees in 2019. As it turns out, these fees earn banks loads of money each year.
But it’s not all bad news. If you’ve been charged an overdraft fee, you could have the opportunity to have it refunded. And if you keep proper precautions in mind for future banking transactions, you could avoid these fees altogether. Let’s see how it works.
How much do overdraft fees cost?
If you know how overdraft fees work, you know they’re typically charged if you try to spend more money than you have in your bank account. For instance, you might be charged an overdraft or non-sufficient funds (NSF) fee if you have $30 in your checking account and make a $40 debit card transaction. This seems fair, but part of the frustration with overdraft or NSF fees is how much they cost.
The Center for Responsible Learning reports that the typical overdraft fee cost is $35, which is often much higher than what a bank actually has to pay for an overdraft transaction. This might not seem like a high amount for some people, but it can be incredibly annoying, depending on your situation.
Here are a few popular financial institutions and their overdraft fees (note that most banks have a limit of how many times they can charge you an overdraft fee per day):
- Bank of America: $35 per item over $1.
- Chase: $34 per item if your account is overdrawn by more than $50 at end of business day.
- Citi: $34 per item.
- U.S. Bank: $36 per item that’s over $5.
- Wells Fargo: $35 per item.
Keep in mind that overdraft fees can be assessed, depending on your bank, even if you’ve barely overdrafted your account. For example, you might have automatic payments set up on a recurring subscription that costs $10 a month, which could end up overdrafting your bank account by a small amount.
So imagine you accidentally overdraft your account by a few bucks and then get hit with a $35 overdraft fee. It’s a bit unreasonable and beyond frustrating. Fortunately, you don’t always have to eat these charges.
How to get overdraft fees refunded: 4 basic steps
If you’ve been charged an overdraft fee, it’s too late to waive the fee or try to avoid it. But you can still work on getting it refunded. The process isn’t overly complex and typically involves giving your bank a call. Though, it’s important to keep a few things in mind as well.
Here are four steps to follow to help you get an overdraft fee refunded:
1. Add up total costs
This is simply a step of getting your ducks in a row before you make the phone call. You’ll want to know how much you were charged in overdraft fees, why you were charged those fees, and when the charges happened. In addition, part of adding up and organizing your costs is figuring out what transaction(s) caused your account to get overdrafted in the first place.
Having all of this information on hand can make it easier to communicate quickly with a customer service representative from your bank.
To find your bank account transactions and fees, check your bank statements, either in your online account or through mailed statements.
2. Prepare for the phone call
Talking on the phone may not be the most comfortable experience for some people, especially if you’re trying to negotiate something. In this case, it’s important to prepare yourself with what you want to say before calling your bank. This can help give you the confidence you need to negotiate effectively.
If you’ve been a loyal customer and don’t have a history of overdrafts or late payments, you might be more likely to get an overdraft fee refund. Be sure to include this information during your call and be direct but polite with your request.
If you want, practice what you want to say beforehand to help calm any potential nerves.
3. Contact your bank
Once you’re ready, it’s time to contact your bank. Phone calls are typically the best way to make a request about refunding overdraft fees, but it might be possible to send a secure message to your bank as well. Sending a secure message could be easier, but not every bank has this functionality or allows these requests to be made over a message.
If this is the case, it’s time to pick up your phone and make the call. Your bank’s general customer service line, which you can find on the bank’s website or your bank statement, is likely the best number to use.
4. Be persistent
The representative you speak with may immediately agree to your request and initiate a refund of your overdraft fee(s). But you could meet some resistance. If so — don’t give up! If the agent you’re speaking with won’t budge, consider talking to a supervisor or calling in again and speaking to someone else.
Remember to cite your good relationship (if applicable) with the bank and be polite with everything you say. Most banks don’t want to lose you as a customer, so it’s in their best interest to keep you happy, which is why it’s important to be persistent with your requests.
5 tips for avoiding overdraft fees in the future
It could make sense to ask for a refund on overdraft fees after the fact, but how can you prevent them from happening in the first place? If you want to help avoid future overdraft fees, consider these tips:
1. Track your balance
If you know how much money you have in your bank account, you’re less likely to use more than what’s available and end up with an overdraft fee. These days, it’s easy to track your available balance with online accounts, mobile banking, or by simply calling your bank. But if you want some assistance, consider using a budgeting app like Simplifi to keep an eye on your finances and set financial goals at the same time.
...Or read our Simplifi review.
2. Turn off overdraft protection
If you don’t want to deal with overdraft fees, opt out of your bank’s overdraft protection service. Lenders typically have this protection in place to make sure you can cover your purchases even if you don’t currently have enough money in your bank account. But of course, it often comes with fees.
Fortunately, federal regulations are in place that allow you to opt out of overdraft protection if you want to. If you opt out, your ATM withdrawals and debit card purchases would be declined if you have insufficient funds instead of causing an overdraft.
3. Set up alerts
With online banking and mobile apps, you often have notification and alert settings you can customize for a more personalized banking experience. In most cases, you’re able to set alerts for when your bank account balance crosses a certain threshold. Low balance alerts could help you avoid spending more than what’s available in your account and steer clear of overdraft fees.
4. Link another account
Some banks allow you to link backup accounts to your checking account to decrease the risk of an overdraft. This could include another checking account, savings account, credit card, or line of credit.
5. Switch banks
If you don’t want to deal with overdraft fees, consider switching to a bank that has a more lenient overdraft policy. Many of the banks on our list of the best checking accounts don’t charge any overdraft fees, which makes it easy to avoid them.
Which bank accounts can help you avoid overdraft fees?
Certain bank accounts make it easy to avoid overdraft fees because they don’t have any. Here are a couple of examples of banks without overdraft fees:
Ally Bank provides different types of financial services, including checking and savings accounts, as well as CD accounts and investment options. Ally checking accounts have a minimal number of fees, which means you don’t have to worry about monthly maintenance fees, low daily balance fees, ACH transfers, or overdraft fees. You won't need to worry about ATM fees when you use ATMs in the Allpoint network, either.
Read our Ally Bank review.
Axos Bank also offers multiple financial services, including checking and savings accounts, investing options, and loans. Some of its checking accounts have no monthly maintenance fees, no monthly balance requirements, and no overdraft fees. Though, if you want to use the cashback checking account, which offers cash back on a debit card, you could be subject to overdraft fees.
Is it possible to get an overdraft fee refunded?
Yes, it’s possible to get your bank to refund overdraft fees. It’s often as simple as contacting your bank and asking them to refund the fees, though it likely helps to have a good relationship with the bank, such as making your payments on time and rarely having overdraft fees.
What fees can you negotiate with your bank?
Most bank charges, including overdraft fees and late payment fees, are negotiable. Banks are businesses, but the customer is part of the business, so it’s not uncommon for bank representatives to waive or refund fees to keep customers happy. This doesn’t mean you’ll always be able to negotiate bank fees in your favor, but it doesn’t hurt to try.
Are there apps that can help you negotiate bank fees?
Can an overdrawn bank account hurt your credit score?
An overdraft itself won’t affect your credit score since checking accounts don’t appear on your credit report. But if you don’t pay the fee and it’s sent to collections, your score could be negatively impacted.
Overdraft fees can be annoying and downright frustrating — but there are ways to avoid them or have them refunded if they’ve already been charged. Unfortunately, overdraft charges are common among accounts from many traditional banks, so it’s important to take the proper precautions and steps to ensure you don’t have to worry about getting charged.
But if you don’t want to deal with overdraft fees at all, consider doing business with one of the best banks that doesn’t include these fees with its accounts. This is likely the best way to avoid overdraft fees since there’s no chance for them to happen in the first place.