Finding Banks With Free Overdraft Protection
Overdraft protection is a system whereby a bank will cover (pay for) any outstanding charges not covered by the bank account holder's current balance. In exchange, the account holder must pay the bank a fee of $20 or more.
On the surface, this sounds like a good thing. After all, the bank is "protecting" the account holder by not allowing his or her charges to be rejected or to have checks bounce. However, many critics believe that overdraft protection programs are just a cleverly-disguised way for banks to make more money. And, they could be right: in recent years, banks have been making about $25 billion in revenues annually off of overdraft fees alone! Clearly, overdraft protection is big business for the nation's banks.
Life Before Protection - Were Things Better or Worse for Consumers?
Overdraft protection is a relatively recent invention. Until a decade or so ago, overdraft protection was not an option for bank customers. Instead, when a person tried to write a check that exceeded the current balance of their checking account, the bank would reject the check. The person who wrote the check would then be subject to fees of up to $100 or three times the amount of the check.
Nowadays, consumers who are enrolled in overdraft protection plans and charge too much or write checks that are too large for their balances (up to certain allowable limit) can rest assured that the charge will be covered by their bank. In that sense, overdraft protection is a wonderful thing.
On the other hand, with overdraft protection in place and with the advent of debit and credit cards linked to checking accounts in recent years, it is much easier to overdraft your account if your balance is running low. That is because your bank will no longer reject the charge like they used to in the old days when you wrote too large of a check. Instead, they just accept the charge, cover it, and collect a nice, healthy fee.
Are we as consumers better off with overdraft protection? It depends upon whom you ask. But, there is no doubt that banks are making a mint on the new arrangement.
Overdraft Fees Add Up Quickly
These days, many consumers checking their bank statements at the end of each month realize that they paid $50, $100 or more to their bank for the privilege of having a few overdrafts covered. Consumer anger about the situation is on the rise, as evidenced by new bills being passed by Congress which are designed to raise consumer awareness about the choices they have when they enroll in these programs.
Finding Banks with Free Overdraft Protection
While most overdraft programs are free in terms of enrollment and monthly usage, they can end up being very costly choices for bank customers who make more than one or two overdrafts a month.
However, some banks now are going a step further by not charging their customers any overdraft fees at all - even if they have an overdraft. Of course, many of these banks limit the amount they will cover before rejecting a pending charge outright (e.g., if your account goes into the "red" by more than $250 or $500 for given transaction). But, most overdrafts are for less than $50, so this is rarely a problem.
About the Author: For a complete list of banks with free overdraft protection that will never charge you overdraft fees - even if you overdraft - check out: http://www.squidoo.com/banks-without-overdraft-fees/ .
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