For American banking customers, overdraft fees are a costly part of life. No matter how diligent you are about keeping meticulous track of your finances, the errant automated payment you forgot about, or an impulsive swipe of your debit card, can send your account into a spiral of unwanted fees due to insufficient funds.
Bank of America, one of the largest multinational banking institutions in the world, does have a lot of fees. However, there are ways to avoid or help mitigate them.
Read More: The Importance of Commercial Banks
Types of Overdraft Fees
The term “overdraft fee” is somewhat of a catch-all phrase to describe the fees a bank charges when your account is overdrawn. However, the truth is that there are several fees you may have to pay when your account goes into the red, and they can keep adding up.
Depending on whether the bank pays the transaction for you, or declines it, determines which fee you can be charged. Learning the different overdraft fees that banks charge, and what triggers them, the overdraft services offered and Bank of America's overdraft policies will go a long way towards helping you avoid them.
Non-Sufficient Funds Fees
Also known as NSF fees, non-sufficient funds fees are triggered when a transaction attempts to post that would send your account into a negative balance. When this happens, your bank has the option of covering the transaction and making the payment on your behalf, or it can decline the transaction if you don't have enough in your account for it to clear.
If the bank rejects the transaction, you can be charged an NSF fee for the declined payment. You will then be responsible for paying returned item fee as well as making arrangements with the merchant you were attempting to pay. The NSF fee you can expect to pay varies by bank, but Bank of America’s NSF fees are $35 at the time of publication.
Bank of America Overdraft Fees
Similar to NSF fees, overdraft fees are levied when a transaction causes your balance to fall below zero. However, instead of declining this transaction, your bank will cover it for you, but this courtesy comes at a cost.
Bank of America’s overdraft item fees will cost you $35 per transaction the bank covers on your behalf. After this happens, not only are you responsible for the money the bank covers for you, but you also have to repay any other overdraft fees that you have incurred while your account is in arrears.
Read More: How to Overdraft Your Bank Account
Extended Overdraft Fees
When you have an NSF or overdraft fee on your account, and you don’t bring your account balance out of the negative, then your bank will likely charge you what is known as an extended overdraft fee. This fee is on top of the initial NSF or overdraft fee that was levied on your account.
For Bank of America, you are charged $35 every five days until you’ve repaid everything you owe and your account is in the clear. If you don’t take care of your negative balance and fees, then you are in danger of the bank closing your account.
Overdraft Protection Fees
Bank of America gives its customers the option of linking their checking account to a savings account, line of credit or other eligible funding source as a backup for when a transaction comes in that will overdraw the account. When a payment comes into your account, and you don’t have enough to cover it, your overdraft protection will trigger and the bank will automatically transfer funds from your secondary linked account to make sure it is processed.
This courtesy isn’t free, but it isn’t as costly as the $35 NSF or overdraft fee you would have to pay if you didn’t have overdraft protection in place. At time of publication, Bank of America currently charges $12 per overdraft protection transfer.
Avoiding Overdraft Fees
There are several ways to avoid overdraft fees. The most obvious way is to practice good money management skills. Keeping track of what you spend and what bills you have coming out of your account, as well as how much money you have coming in, will ensure you’re not in for any surprises.
Unfortunately, this keen money management is sometimes easier said than done, and oversights do happen. To help counter this, Bank of America provides its customers with various money management tools as well as online and mobile banking options so you can check your account balance or set up low-balance notifications that alert you to make a deposit.
You can also opt out of overdraft coverage entirely. Many people may not know this, but you can contact your bank and have a customer service representative or teller remove your overdraft coverage. The easiest way to avoid overdraft fees is to do away with the coverage. However, this means that when a transaction comes through and you don’t have enough in the account to cover it, the bank will not process the payment and it will be declined.
Opting out of overdraft coverage does not necessarily apply to recurring debit charges or checks you have written, and banks can choose to cover these items even if you have opted out of overdraft coverage.
The good news is, most banks do not charge NSF fees for declined debit card purchases. For example, if you've opted out of overdraft coverage, and you swipe your debit card for a purchase which you don’t have enough money to cover, then the transaction will simply be declined and you likely will not incur NSF fees. If you did not specifically opt out of this service, the bank can elect to pay a one-time debit card purchase for which you would be responsible for any overdraft fees that come as a result of the bank covering the payment for you.
Having Your Overdraft Fee Waived
If you don’t have a history of overdrawing your account, you can contact a customer service representative or stop by a branch to ask a teller if they'll waive your overdraft fees. Sometimes extenuating circumstances come up, and if you ask politely, you may be able to get the fee waived. You’re more likely to get the fees waived if you have a solid history of maintaining your account in good standing than if you routinely overdraw your account.
- ValuePenguin: Bank Overdraft Fees – What are They and How Much Do Banks Charge?
- NerdWallet: How to Avoid Overdraft Fees
- Bank of America: Bank Account Rates & Fees FAQs
- Consumer Financial Protection Bureau. "A Closer Look: Overdraft and the Impact of Opting-In," Page 1. Accessed March 27, 2020.
- Consumer Financial Protection Bureau. "A Closer Look: Overdraft and the Impact of Opting-In," Page 4. Accessed March 27, 2020.
- National Credit Union Administration. "Overdraft and Non-Sufficient Funds (NSF) Fees." Accessed March 27, 2020.
- Board of Governors of the Federal Reserve System. "Federal Reserve Announces Final Rules Prohibiting Institutions From Charging Fees for Overdrafts on ATM and One-Time Debit Card Transactions." Accessed March 27, 2020.
- U.S. Government Publishing Office. "The Overdraft Protection Act of 2009." Accessed March 27, 2020.
- Consumer Financial Protection Bureau. "A Closer Look: Overdraft and the Impact of Opting-In," Page 2. Accessed March 27, 2020.
- Consumer Financial Protection Bureau. "You’ve Got Options When It Comes to Overdraft," Page 1. Accessed March 27, 2020.
- Ally Financial. "Bill Pay FAQs." Accessed March 27, 2020.
- Consumer Financial Protection Bureau. "You’ve Got Options When It Comes to Overdraft," Page 2. Accessed March 27, 2020.
- Commonwealth of Massachusetts. "Consumer Alert: Overdrawn Accounts." Accessed March 27, 2020.
Tara Thomas is a Los Angeles-based writer and avid world traveler. Her articles appear in various online publications, including Sapling, PocketSense, Zacks, Livestrong, Modern Mom and SF Gate. Thomas has a Bachelor of Science in marine biology from California State University, Long Beach and spent 10 years as a mortgage consultant.