Avoid Overdraft Fees: Strategies & No-Fee Checking Accounts

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Banks make billions of dollars in fees for overdrafts. You can overdraw your account for as little as ​$5 or $10​ and get charged ​$35​ in overdraft fees. When your account becomes further overdrawn, you may face additional charges. It can cost a lot to get back to zero.

Consumer backlash and Congressional inquiries have led several banks to respond to this problem by dropping overdraft charges. Various banks now offer no-fee or low-fee checking accounts with no overdraft charges.

Ally

While Ally Bank® doesn't have any physical branches, they are a full-service bank. Ally Bank offers online banking services such as no-fee checking accounts, savings accounts, CDs, mortgages and personal and auto loans.

In 2021, Ally Bank announced that they were completely eliminating overdraft fees. And they never charged overdraft fees for debit card transactions.

Alliant

Alliant is a credit union that also announced in 2021 that it was eliminating overdraft fees. Since credit unions are technically nonprofits owned by their members, eliminating these fees directly benefits its members.

According to their website, to qualify for the no-overdraft fee program, you must enroll in the Alliant Courtesy Pay program. This means that you must set up direct deposits into your Alliant checking account with a monthly amount of at least ​$600.​ Usually you can meet this requirement by having your paycheck directly deposited into your account.

Customers also have the option to avoid overdraft fees by linking their checking accounts to their savings accounts.

Discover Bank

Although technically, Discover Bank® does charge an overdraft fee, they only charge ​$30​ per day and not for each transaction. Many banks typically charge ​$35​ for each transaction after the account gets overdrawn, which can add up to a few hundred dollars in a single day.

The other option to prevent overdraft fees is to link your checking account with a savings or money market account and get no-fee transfers to cover overdrafts.

Capital One 360

Capital One® offers Capital One 360 checking, which provides three ways to avoid overdraft fees.

• ​Line of credit:​ The bank will open an overdraft line of credit that will, in effect, give you a loan to cover the amount of your overdraft. You'll have to pay interest on the amount borrowed, but it'll probably be a lot less than overdraft fees.
• ​Link to your credit card:​ If you already have a credit card through Capital One, you can set up a link to make advances on your credit card when you have an overdraft.
• ​Link to your savings account​: This method eliminates overdraft fees by linking your savings account to your checking account. When you have an overdraft, the bank will transfer funds with no fees from your savings account to cover the overdraft.

In addition to online banking, Capital One has more than 750 physical branches. You can open a Capital One 360 checking account with no minimum deposit. Their checking accounts have no monthly fees.

Chime

Chime® is a financial technology company with banking services provided by The Bancorp Bank or Stride Bank. They offer "SpotMe," an optional, no-fee service that will spot you up to ​$200​ on your debit card purchases with no overdraft fees. However, you must set up monthly direct deposits of ​$500​ or more to qualify. Typically, this means having your paychecks deposited directly into your Chime account.

You can open a checking account with no minimum initial deposit and no monthly service charges. Their checking accounts come with a Visa debit card that has access to more than ​38,000​ ATMs with no fees.