Banking

These 9 Banks Have Eliminated or Reduced Overdraft Fees

Tired of paying fees for not having enough in your account? Banks are starting to change their ways.

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An overdraft fee is a fine imposed by your bank when you spend more money than you have available in your account. Some banks provide overdraft protection, which automatically moves money from a linked account into an overdrawn one. 

But not all banks will -- and some charge a fee for this service. 

Overdraft fees have become abusive enough to garner attention from Capitol Hill: Senator Elizabeth Warren sparred with J.P. Morgan Chase's CEO last year over the practice and both chambers of Congress proposed bills last year to limit the fees, which can be charged multiple times a day. 

In 2020, banks reaped $12.4 billion from consumers in overdraft fees alone, according to the annual spend report conducted by the Financial Health Network.

In response to this widespread criticism -- and to compete with online banks that cut these fees years ago -- more and more major US institutions are either limiting or entirely eliminating overdraft fees. 

Not all banks are created equal. So while we continue to monitor this shift, here are seven banks that have ended overdraft fees, followed by two banks that have reduced them.

Citigroup

Starting this summer, Citibank will eliminate all overdraft fees, returned-item fees and overdraft-protection fees, the company announced in February. 

Citibank, which has some $1.7 trillion in assets, is the first of the "big four" banks -- a group that also includes JP Morgan Chase, Bank of America and Wells Fargo -- to entirely eliminate overdraft fees.

In addition, Citibank offers a Safety Check feature that will transfer available funds from any linked Citibank savings account to cover overdrafts. The service is free with a Citigold or Citi Priority account or $10 with other accounts

Customers approved for a Checking Plus account can automatically have funds transferred from a credit line to their checking account to cover overdrafts.

Capital One

Capital One eliminated overdraft fees starting Jan. 13, replacing the old practice with what the bank dubs "No-Fee Overdraft" protection.

No-Fee Overdraft protection will allow you to overdraw your account without incurring a fee, but once you do,  you'll need to deposit money into your account to cover the overdraft. If you try to use your card once after you've overdrawn, but before you fund your account, the transaction will be declined.

There isn't a fixed cap on how many times you can overdraw, but there will be a dollar limit on how much you can overdraw your account by. That dollar amount will be based on your individual circumstances, as Capital One says it will continually evaluate "the customer's deposit history and risk profile," according to the spokesperson. 

If you're currently enrolled in this bank's overdraft protection program, you should have been automatically enrolled into the No-Fee Overdraft protection. If you aren't enrolled in the service, you can sign up at any time.

Discover

Discover is another bank without overdraft fees. This bank has a free overdraft protection program, but you'll need to link a savings account or a money market account to your debit account to be able to overdraw. 

And while on paper Discover limits overdrafts to six per calendar month per account, Discover also says it currently isn't enforcing these rules, meaning you can overdraft more than six times on more than an occasional basis without running the risk of Discover closing your account. 

Chime

Chime's free overdraft protection service is called SpotMe. This service is optional, meaning you'll need to enroll for the service if you aren't already.

It's available to members who make a direct deposit of $200 or more each month to their checking account. While the service says you can overdraw up to $200 a month, initially you'll only be able to draw $20 on debit card purchases and cash withdrawals. Later, you may become eligible for the higher $200 limit. 

Whether you're eligible for this higher limit is based on your "Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors," according to Chime.

Ally

Ally originally rid itself of overdraft fees in response to COVID-19 in 2020. Ally reimbursed fees that had accumulated at that time, but it decided to just say goodbye to overdraft fees entirely after that. 

At Ally, you can overdraw your account without incurring a fee. You'll have six business days to bring your account back to a positive balance. If you haven't brought up your balance by then, Ally will work with you to figure out a solution, and your account withdrawals may be limited.

You can also sign up for an optional, free overdraft transfer service: Ally will transfer money from a linked savings account or money market account in $100 increments. This service limits these transfers to six withdrawals per statement cycle. 

Aspiration

Aspiration's "Pay What is Fair" commitment refuses to let you be hit with any unforeseen fees, including overdraft fees. Thus, as a customer at Aspiration, you'll never have to pay for overdrawing your account -- but this isn't a free overdraft service.

"We are usually able to prevent the processing of checks, ATM withdrawals, debit card purchases or online transfers from happening when our members don't have enough funds in their account to cover them," said Aspiration CEO Andrei Cherny. "If there is an accidental overdraft on an account that puts it into the negative, customers are given a period of time to make their accounts positive."

In other words, you'll have a grace period to bring your account back to positive if an overdraft charge manages to go through.

Truist

A new bank that's the result of a merger between Suntrust and BB&T, Truist plans to launch two new checking accounts without overdraft fees this summer under its new Truist One Banking. Rather than customers racking up overdraft fees, Truist One Banking will grant a $100 negative balance buffer for those who insistently make deposits of $100 or more for two consecutive months. 

If you're currently a Truist customer, you'll have the option to open a Truist One checking account, though you won't be automatically migrated. 

Even if you don't sign up for Truist One Banking, Truist also plans to eliminate most overdraft fees for existing accounts as well, including for returned items, negative account balances and overdraft protection transfer fees, according to Arijit Roy, Head of Strategy, Deposits, Small Business and Analytics at Truist. 

Bank of America

In January, Bank of America announced it would be slashing its overdraft fees in May from $35 to $10 per overdraft transaction. Along with reducing these fees, the bank will also eliminate the $12 Balance Connect™ service charge to transfer funds from linked accounts to overdrawn accounts. 

Wells Fargo

Announced the same day as Bank of America, Wells Fargo is eliminating various fees associated with overdrawing starting in March -- but they aren't going away completely. While you won't have to pay fees when a linked account covers an overdraft, you'll only have a 24-hour grace period to bring your account back to positive if you overdraw. 

To be sure, as with Bank of America, this move is an improvement, but it does feel lackluster compared to other banks included on this list. 

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