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Is Overdraft Protection Worth It: Pros and Cons

By Kyle Kapper

Updated Sep 29, 2023

Overdraft Protection

    All of us have bounced a check or logged into our bank only to see that our bank account was in the negative because of an overdraft fee and wished that we had overdraft protection.

    Overdraft fees can happen even for people who regularly check their bank account and are vigilant. Some charges from online merchants or gas stations might not go through for a week or two, so you might believe that it was already processed and you still have money to spend.

    If this has happened to you on more than one occasion, you’re probably wondering whether overdraft protection is worth it, especially if you use your debit card a lot.

    A report from the Consumer Financial Protection Bureau in 2014 indicated debit card transactions were the cause of more overdraft fees than any other type of transaction.

    Let’s look at some standard overdraft bank fees to start:

    Overdraft Bank Fees

    Bank of America Overdraft Fee$35; up to 4 fees per day
    Chase Overdraft Fee$34 for transactions over $5; up to 3 fees per day
    Wells Fargo Overdraft Fee$35 per item; up to 3 fees per day*
    TD Bank Overdraft Fee$35 for transactions over $5; up to 5 fees per day
    US Bank Overdraft Fee$36 for transactions over $5
    PNC Overdraft Fee$36; up to $144 or 4 fees per day

    *Up to 8 fees per day for commercial accounts and $15 per fee up to 2 fees per day for teen accounts

    Let’s look at an example of just how inconvenient this can be:

    1. Tina went to Subway to get a sandwich Tuesday night after work. She paid $6.57 for her sandwich.

    2. On her way to work the next morning, Tina stopped to get gas and put $30 of gas in her car.

    3. Remembering that she was out of toilet paper, she stopped by the local supermarket on her lunch break to grab some. She spent $12.43.

    4. Tina did not realize that an annual subscription fee was processed Tuesday morning. Tina had $50 in her account when she bought her sandwich or so she thought. But the subscription was $55.

    Let’s follow these events and see what fees Tina has now:

    1. Tina’s bank charged her 1 $35 fee for processing the annual subscription. She was -$5 for the fee and -$35 for the overdraft fee. Total: -$40.

    2. Her subway sandwich added another fee. Now Tina is -$6.57 and -$35. Total: -$41.57.

    Total Tuesday: -$81.57

    1. Her gas added another fee of $35 and the -$30 for the gas. But Tina didn’t know her account was overdrawn, so the fees from Tuesday earned a second overdraft fee for each transaction: -$35 for the subscription and -$35 for the sandwich. Total: $-135.

    2. Her toilet paper added another fee of $35, with the -$12.43. Total: -$47.43

    Total Wednesday: -$264

    Just by failing to check her account one day, Tina accrued an extra $70 in fees for the charges she made on Tuesday, not to mention all the other things she did on Wednesday.

    What Is Overdraft Protection?

    If you don’t want all of these fees to pile up like Tina, banks give you the alternative of overdraft protection. The law says they have to.

    Overdraft protection is a way to prevent these multiple fees by linking a second account. The idea is, when there isn’t enough money in one account, money can be moved by the bank from another account to cover it.

    • Most people link a savings account to their checking account so that if they run out of money in their checking account for everyday expenses, the bank can move a little bit from the savings account.

    • Some people link a second checking account that they have with the same bank, usually something like a joint checking account shared with a spouse.

    How Does Overdraft Protection Work?

    If you consider the example of Tina, were Tina to have overdraft protection, her bank would have moved money from her savings account to cover the difference for the annual subscription, her Subway sandwich, for gas and her toilet paper.

    The bank still would have charged her a fee each time, but that would avoid the second overdraft fee on Wednesday for the things she did on Tuesday, and it wouldn’t be as high.

    What Is a Overdraft Protection Fee?

    But what would it be? How much would it cost Tina with overdraft protection?

    The overdraft protection fee varies by the bank; some charge a single fee each time, while others charge based on the amount of overdraft.

    Does Overdraft Protection Cover Checks?

    Have you ever seen an NSF fee listed on your account and wondered what it was? This is a fancy financial term that just means” non-sufficient funds” or “insufficient funds.”

    You didn’t have enough money in your account—end of the story.

    Or is it?

    If you write a check for $100 to a merchant, like a grocery store, and you only have $50 in your account, your bank can choose to bounce the check, which means they try to process it, they found out there wasn’t enough money, and they sent it back to the merchant.

    Banks charge you a fee each time there is a bounced check because they still put in the work to try and process it (or rather, a computer did), or they can choose to process it and charge you an overdraft fee.

    Will My Check Bounce if I Have Overdraft Protection?

    If you have overdraft protection, the bank will process your check. They will move money from whatever accounts are linked to your overdraft protection service and then charge you a fee for transferring the money.

    But at least they won’t bounce the check.

    What Type of Accounts Can Be Linked to a Checking Account for Overdraft Protection?

    Traditional banks let you link up to two accounts to your overdraft protection, but they have to be accounts with that same bank.

    • You can’t link your Chase checking account to your Wells Fargo savings account for overdraft protection through Chase.

    • You can link checking accounts, savings accounts and sometimes credit cards or personal lines of credit.

    Note: You can do this with third-party e-wallets like PayPal or online-only banks like Capital One. These companies let you link checking or savings accounts to your online banking account or even your online credit card.

    Banks With Overdraft Protection

    Just about every major bank offers overdraft protection, the price and terms for which vary.

    BankName of ServiceFees
    Bank of America overdraft protectionOverdraft ProtectionBank of America requires you to link a BofA account for overdraft protection and charges $12 each time money is moved from your savings account.
    Chase overdraft protectionOverdraft ProtectionChase charges up to $5 for each transfer from your Chase-linked savings account to cover overdrafts.
    Wells Fargo overdraft protectionOverdraft Rewind Overdraft ProtectionIf a deposit is received by 9 am the next morning, no fee is assessed. Link up to 2 eligible accounts, and money will be transferred. Wells Fargo will charge a fee each time, based on the amount transferred.
    TD Bank overdraft protectionSavings Overdraft ProtectionTD Bank charges you $3 per day when a transfer is made from your savings account, but it must be linked to your savings account with TD Bank. For all other overdraft protection services, TD Bank still charges $35 for processing.
    US Bank overdraft protectionOverdraft ProtectionThere is a $12.50 charge for transfers from another US Bank account. This bank also transfers in multiples of $50, so if you are negative by $10, they will move $50 minimum from your savings.
    PNC overdraft protectionOverdraft ProtectionYou can link a PNC savings to another PNC checking account like a joint account, a PNC credit card or a PNC line of credit. There are no fees for overdraft protection.

    How to Get Overdraft Protection

    If you’ve decided that getting overdraft protection is worth it for you, all you have to do is schedule a meeting, typically over the phone or in person, with your local bank branch.

    Note: If you don’t have a second account with your bank already, you will have to open a second account and link it.

    It’s a very simple process.

    Some banks help you manage this overdraft protection with an overdraft protection app. With this app, you can check your accounts, see the balances, see what has come through recently, what purchases were declined and many other things.

    How to Turn Off Overdraft Protection

    So what if you don’t want overdraft protection? What if you would rather deal with the embarrassment of your card being declined or your check being bounced?

    Banks allow you to opt out of overdraft coverage for ATM or debit card transactions as a general rule. In the event that you don’t have enough money to cover the total charge, it gets declined, and you don’t see a fee on your account.

    Overall, overdraft protection may be worth it for you if you don’t have notifications set up for low balance alerts with your bank or if you regularly miscalculate how much you have in your account. Banks that charge minimum fees or, like PNC Bank, no fees are well worth considering.

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