Overdraft protection is a system through which the bank covers any pending fees that are not covered by the current balance of the bank account holder. In exchange, the account holder must pay a bank fee.
That looks like a good thing. After all, the bank protects the account holder by not allowing their fees or checks to be rejected. However, many critics believe that overdraft protection programs are just an ingeniously convincing way for banks to earn more money. And it may be right: in recent years, banks have generated billions of revenue annually just for overdraft charges (https://www.kassekreditt.no/) ! Protecting an overdraft is an essential business for national banks.
Life before protection: was it better or worse for consumers?
Overdraft protection is a relatively recent invention. Until a decade or so, overdraft protection was not an option for bank customers. Alternatively, when someone tries to issue a check that exceeds the current balance of their checking account, the bank will decline the test. The person who issued the examination is subject to a fee of $ 100 or three times the amount of the inspection.
Today, consumers enrolled in overdraft protection plans that charge very high fees or issue extensive checks for their balances can be sure that the bank will cover these fees. In this regard, overdraft protection is excellent.
On the other hand, with overdraft protection and debit and credit cards associated with checking accounts in recent years, it is much easier to withdraw money from your account if your balance is low. That is because your bank will not reject this charge as it was in the old days when you issued a very large check. Instead, they only accept and cover rates and charge friendly and healthy rates.
Are we as consumers in a better position with overdraft protection? It depends on who you ask (https://www.kassekreditt.no/slik-virker-det) . However, there is no doubt that the banks are taking mint in the new agreement.
Overdraft charges add up quickly.
Currently, many consumers who review their bank statements at the end of each month realize that they have paid some money to their bank in exchange for the privilege of covering some overdrafts. Consumers are increasingly angry at this situation, as evidenced by the new laws passed by Congress that aim to increase consumer awareness of the options available to them when registering for these programs.
Find banks with a free overdraft.
While most overdraft programs are free in terms of monthly registration and use, they can ultimately be costly options for bank customers who make more than one overdraft or twice a month.That can help you find the best bank for the overdraft that you can find in banks.
However, some banks are now taking a step forward by not imposing any withdrawal fees on their clients, even if they have an overdraft. Of course, many of these banks limit the amount they will cover before rejecting any pending charges directly. But most overdrafts are less than $ 50, so this is rarely a problem.