Overdraft protection is a system by which a bank will cover (pay) any outstanding charges that are not covered by the bank account holder’s current balance. In return, the account holder must pay the bank a fee of $20 or more. After all, the bank “protects” the account holder by not allowing their charges to be rejected or their checks to bounce. However, many critics believe overdraft protection programs are just a cleverly disguised way for banks to make more money. And they might be right: In recent years, banks have generated about $25 billion in annual revenue from overdraft fees alone.
Overdraft protection is big business for the country’s banks. Life before shelter: were consumers doing better or worse? Overdraft protection is a relatively recent invention. Up until about a decade ago, overdraft protection was not an option for bank customers. If a person instead tried to write a check for more than their current checking account balance, the bank would default the bill. The person who wrote the review would pay fees of up to $100 or three times the check amount. Today, consumers who are enrolled in overdraft protection plans and charge excessive fees or write overdue checks (up to a specific allowable limit) can rest assured that their bank will cover the cost. In this respect, overdraft protection is a beautiful thing.
On the other hand, thanks to overdraft protection and the advent of debit and credit cards linked to checking accounts in recent years, it’s a lot easier to overdraw your account when your balance is running low. This is because your bank will no longer reject the charge as it used to when you overbought a check. Instead, they accept the fee, adopt it, and charge a nice, healthy fee. As consumers, are we better off with overdraft protection? It depends on who you ask. But there’s no doubt that the banks are making money from the new deal. Check it out to find banks here.
Overdraft Fees Are Rising Fast Today, many consumers who check their bank statements at the end of each month find that they’ve paid their bank $50, $100, or more for having some covered overdrafts. Consumer anger over the situation is growing, according to new bills passed by Congress to raise consumer awareness of the options when they enroll in these programs. How to Find Banks With Free Overdraft Protection While most overdraft programs are free to sign up and use monthly, they can become costly for bank customers who overdraw more than one or two a month.