Bank of America may soon offer a new type of checking account – one that comes without overdraft fees. Overdraft fees occur when a debit-card holder withdraws more money than they have in their checking account. At an average of 35 dollars per transaction, these are deeply frustrating for people.
The proposed checking account would cut the possibility for overdrawing by preventing consumers from using their card when they have a low or insufficient balance to back up the purchases. Instead, the cardholder would be alerted of the fact and the transaction would be declined. Most customers already have the protection for direct purchases (at restaurants or retail stores) but the new checking account would deny ATM withdrawals and online automatic payments.
Though these accounts have yet to be released, the proposal may be indicative of a greater demand for products that respect consumers and have transparent costs for cardholders. Wondering about your own card? Here’s how to protect yourself from overdraft fees in the until every company eliminates them:
Activate overdraft protection
A rule passed by the Federal Reserve requires banks to offer overdraft protection which prevents cardholders from purchasing more than their funds can cover. That means if you don’t have enough to cover a direct purchase (for example at a grocery store or at a retail store), the transaction will be declined. Though it’s now a standard in checking accounts it doesn’t currently apply to ATM withdrawals. If you aren’t sure how to set up overdraft protection or aren’t sure if it’s already set up for your specific account, ask your bank.
Set alerts for your phone or e-mail account
Most online banking sites have a settings page where you can turn on specified banking alerts. These alerts can help you remain aware of your banking activity and give you a protective reminder about overdraft fees. You can customize your alerts and choose to receive notification only when you reach a certain low balance or are in danger of overdrawing on your account.
Balance your finances
Overdraft fees can be particularly surprising if processing of checks or withdrawals is delayed. If you’ve written a check that has yet to be cashed or is pending, your balance may reflect an inaccurate amount available. This can be particularly true for large sum checks ie rent or bills. You can use programs like Quicken or Mint to ensure that your accounts are balanced.
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Negotiate with your bank to refund your fee
If it’s your first time overdrawing from your account, or you have good standing with your bank, there’s a good chance you can get your fee refunded. Calling can work, but it’s often worth the time to go to your branch and talk with a teller. Be friendly but also firm in your desire to remove the fee. Mistakes do happen and banks know this. Taking the time to actually make your case could result in the fee being refunded.
Set reminders for your automatic payments (especially annual or bi-annual subscriptions)
Automatic payments for subscriptions like magazines, music sites, and/or charitable donations can result in an unexpected drop in funds. To avoid the surprise of an automatic payment set up a reminder on your calendar or your phone a few days before the payment is scheduled to be withdrawn. That way you can anticipate the decrease in funds and prevent accidentally withdrawing over your balance.
If you’re unsure of your funds – double check
Awareness of your financial circumstances help you to avoid overdraft fees and keep in touch with your accounts. It’s always good practice to check-in on your account if you’re unsure of your funds. Especially since the ability to check your funds is easier than ever with smart phones and apps. But when you are checking-in, you need to know the difference of account (or current) balance vs. available balance. Your account balance is the state of your account at the beginning of a business day, while your available balance takes into account any pending transactions, deposits or withdrawals. Available balance is the number that’s reflective of what cash is technically available.
The overdraft fee has long been a source of customer frustration but the end of these fees may be in sight. Fortunately, the proposed account by Bank of America could indicate a shift in the way that banks assign fees to their customers.
The end of overdraft fees? Let’s hope so.
Image Credit trenttsd