Consumers Get a Break on Overdraft Fees

Good news for customers who occasionally overdraw their checking accounts: More banks are cutting you some slack. Capital One and several online banks already offer free overdraft transfers (see Best of the Online Banks). Now, Chase is dropping its $10 fee to transfer money automatically from a linked savings account to checking to cover an overdraft. And instead of transferring money in $50 increments, the bank now pulls the exact amount that’s needed. Chase is also eliminating credit cards as a backstop to cover overdrafts. (Credit card overdraft transfers typically trigger cash-advance fees.)

Some banks still levy transfer fees—as much as $15 per transfer. Banks may also offer the pricier option of overdraft protection to cover most overdrawn ATM and debit card transactions. Chase charges $34 for its service, and the median fee is $30 per overdraft, according to research firm Moebs Services. Even credit unions have raised their median overdraft fee to $29 in the past six years, Moebs found.

As another source of backup, some institutions provide qualifying customers with an inexpensive line of credit from which the bank borrows if their checking account goes into the red. If you use a credit line with the online Capital One 360 checking account, for example, and overdraw by $50, you’ll owe about 2 cents per day at the recent 11.5% annual percentage rate until you pay back the $50. But not all banks are as generous. TD Bank, for example, charges a $25 annual fee, plus $10 for each day that it taps a line of credit.

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If you don’t have any kind of overdraft protection and present your debit card, it will be rejected at the register. But if you write checks returned for insufficient funds, you could still be hit with bounced-check fees.