A bank is not less complicated than Math or any other tough subject out there. Banks have so many products and services to offer today that it is difficult to constantly keep reminding yourself as to what can be obtained from them and what can’t be. Overdraft fees is one of those tricky terms. In this article, we will explain to you what an overdraft is and how to get overdraft fees refunded. We will also answer questions like can banks charge overdraft fees during COVID and are overdraft fees charged immediately.
How to Get Overdraft Fees Refunded? A Guide
Overdraft can be a difficult concept to grasp if you are new to the banking system and have just opened an account. The same goes for overdraft fees. But these are crucial terms that are important to comprehend otherwise you can lose some money. Before we learn can banks charge overdraft fees during COVID, let us understand an overdraft.
What is an Overdraft?
A bank has a lot of types of accounts to offer to you with the most common ones being savings and business accounts. Your business account comes with a facility that is known as overdraft which is not available to the savings account holder. By overdraft facility what is meant is that you are allowed to draw more money than the balance held in your account.
Suppose you have 4,000 dollars in your account, an overdraft facility would allow you to withdraw 5,000 or even 6,000 against this balance. With a savings account, it is usually not even possible to withdraw the whole available balance as your bank account needs to have a minimum balance in it but the overdraft facility allows you to draw full or excess amounts.
Now you may think that it is better to have a business account because the overdraft facility can turn out to be a lifesaver. However, think of an overdraft facility as a loan that you have to repay. Also, the charges for overdrafts are usually higher because of their nature of providing you with instant liquidity. And also the overdraft facility is only available to a business account holder and not just about anyone and everyone.
Before we turn our attention to look at how to get overdraft fees refunded there are some more basic things to know about overdrafts like the types. You have authorized overdrafts and unauthorized overdrafts. The former is one where you and the bank have an agreement in advance, the limit of overdraft is outlined in advance and that is why it is also known as an arranged overdraft.
An unauthorized overdraft is also known as an unorganized or unarranged overdraft. Here there is no agreement between the bank and the slender in advance and going over the limit in an arranged overdraft also counts as an unauthorized overdraft.
While traditionally overdrafts have brought higher charges with them it all ended in April 2020 when changes were made to the existing charges. The APR or range set for overdrafts is placed between the brackets of 19 and 40%. While overdrafts can help you in case of a check that might have bounced, if the overdraft itself is not paid back in time then it can also become a significant problem to deal with. Later on, we will also learn can banks charge overdraft fees during COVID.
How to Get Overdraft fees Returned?
Now comes the obvious question of human error. What happens when you accidentally withdraw more than the balance available in your account? This has now triggered the overdraft facility and so you now have to pay the charges for the same and these charges are usually significantly higher than other changes. Finding yourself stuck in this situation, do you think there’s a way out from here? Is there a way to get a refund on the overdraft fees or have you lost it forever?
Well, all you have to do is ask how to get overdraft fees returned and we shall help you with the same. However, you need to have been a good client in the past. If you have been a good client and always made payments on time, have been good with the company employees or customer service team, and don’t have a history of frequently taking overdrafts then you are already halfway there and have a good chance of scoring a refund on that overdraft fee of yours.
To get a refund on the overdraft fees all you need to do is contact the customer service team of the bank over the phone or head to a branch of the bank and ask to speak to a bank employee. Now explain to them your side of the story as to how the charge came to be and why it shouldn’t have in the first place. Be honest about your situation and make sure it was a genuine case of a mistake before you plead innocence.
Once you have made the request the decision now lies with the bank. As mentioned above there are some criteria that you need to meet, if you meet those criteria you stand a better chance of successfully pleading your case as the bank believes in your story and understands that a genuine mistake has occurred on your part and so they make an exception and refund the overdraft fees. However, some banks may still not be able to process your request as this is not a simple decision to make and so it is better to be safe than sorry when dealing with stuff like an overdraft. Let us now answer can banks charge overdraft fees during COVID.
Can Banks charge Overdraft fees during COVID?
The COVID pandemic brought a situation that didn’t have any recent predecessor and so there were no preparations in place for something of this sort. Just like the whole world was caught out, banks were caught out too. The overdraft facility didn’t come with any specific plans in place for a situation like this and so they remained unaffected by it. So while COVID ravaged the world, overdrafts continued to exist as they did in the past.
However, this doesn’t mean that there weren’t appeals or voices that brought attention to the matter. Banks usually charged 30 to 35 dollars as a fee for every overdraft facility used. But when the pandemic came a lot of people called out for a change in which they requested such charges to be waived off or be done with. And that is what happened to a great extent. While people might have already started looking for how to get overdraft fees refunded, several banks either abolished these charges altogether or scrapped and changed the existing overdraft system.
While the question of whether can banks charge overdraft fees during COVID was still being asked in the infancy period of the pandemic, certain banks had already abolished the fees. Capital One, Alliant Credit Union, and Ally bank were the first ones to do so while Citibank and many others followed. Bank of America didn’t abolish the charges but reduced the overdraft fees from 35 dollars to 10 dollars which also is a welcome change.
Overdraft fees had already started to drop in the amount that they brought in every year. In America itself, the money brought in via overdraft fees was more than 15 billion dollars in 2019. However, this sum fell to just above 10 billion dollars in 2020 and fell further in 2021 hinting at the changes that needed to come.
In 2020 Americans spent 319 billion dollars in making payments for interest and fees paid on various stuff but this number also fell to 305 billion dollars in 2021 which was again a significant drop in such spending in a decade. Now you know the answer to can banks charge overdraft fees during COVID.
Are Overdraft fees charged immediately?
So we now know how to get overdraft fees refunded but that is the latter part of the transaction. What comes before is knowing when exactly you are being charged the overdraft fee. You can be subject to an immediate charge, be given a grace period, or may have quite some time on your hand before you have to worry about paying the fee but which one is it? How long does your bank wait for you before they charge an overdraft fee from you?
So if you might be wondering, are overdraft fees charged immediately, or if you have some time on hand before your account starts going deeper in red numbers? Well, the good news is that you have some time in hand depending on the bank that you have chosen.
Most banks allow a waiver on overdraft fees if the amount overdrawn is less than 5 dollars. However, cross this threshold and you may find yourself subject to an overdraft fee. But again various banks have a grace period in place during which you are allowed to get back your balance to zero or positive.
Usually, banks allow you to correct your balance by the morning of the next day. So if you used the overdraft facility on January 1 then you can correct the balances by the morning of January 2 and avoid paying any overdraft fee, however, once this period has ended you are then subject to an overdraft fee which can then only be avoided by the process mentioned in how to get overdraft fees refunded section and even then there is only a chance of a refund and no surety.
To avoid being charged an overdraft fee you can also make sure to keep your account linked to another medium of payment like a debit card, another bank account, or other options available to you. However, while the overdraft protection facility protects you here it now makes you liable to pay an overdraft protection fee which is nonexistent at online banks but standard banks can charge you anywhere between 10 to 12.5 dollars per transfer which is very less compared to overdraft charges.
If you don’t take the overdraft seriously and don’t pay it back in time then the charge incurred by you can keep on increasing. You are usually given around a week to correct your balances or else the banks start imposing extended overdraft fees on you. Some banks may do say one time in five days while others may incur a charge daily until the account balance is cleared.
Some Tips to Remember
We saw above how you might be charged an overdraft fee by mistake. While pleading and making a case for yourself is an option to try and get a refund it might not always come across as the first and best option to use in such a situation and that is why we have a few more solutions that you can turn to in times like these. One of the best bets would be to turn to an overdraft fee refund app or you can also check out the other options that we mention below.
Overdraft Fee Refund App
Today you have apps for almost anything and everything and along with them, you also have apps that get you overdraft refunds. The Cushion is one such app that uses an AI model and analyzes your account and contacts the banking institutions. Recoup and Harvest can also act as an overdraft fee refund app as they analyze recurring fees like subscriptions and help you save money.
Various such apps on the market can directly or indirectly help you avoid paying overdraft fees and so you can check them out and read about the services offered by them. If you feel they can be useful then you can proceed to download and use them.
A lot of people stare in the face of difficulty and go blank, that is something you need to avoid when facing such a situation. The first 24 hours are very crucial when you find yourself in a position where you are being charged an overdraft fee.
As soon as you see a charge being imposed on you that you feel is not appropriate you need to be prompt in either correcting the balance, paying the fee, or complaining. This shows that you are an attentive customer and also paints a picture showing you as someone who had an accident rather than it being a common occurrence and that might help you score a refund.
As we saw in the how to get overdraft fees refunded section you can always opt to contact a customer service executive and explain to them your situation. You just need to be calm and respectful while explaining the issue and mentioning the date and time of its occurrence.
One can also mention your good track record as a customer and can ask for an alternative solution for the future. You can also ask for a partial refund if the option for one is available. If none of this works then ask them to set you up to talk with an employee with a higher post and repeat the same.
The reason an overdraft takes place is that the account is running on low or no balance. However, if you could just quickly add a few bucks or more to your account then you can prove your point that you indeed have the money to cover your expense and that the overdraft situation was a mistake that occurred due to a lapse of concentration or otherwise.
This might also show the bank employees that you are indeed a good and trustworthy client and may make your case stronger in front of them proving to them your innocence and making them consider giving you a refund.
You can put in an effort and check from a range of banks to find which ones don’t charge an overdraft fee. Now there might be quite a few options since after the pandemic a lot of banks have dropped these charges altogether.
Apart from them, you have online banks that you can turn to avoid paying such charges. You also have apps like Steady that pay you cash for making smart financial decisions. And so you can adjust your overdraft fee losses by adjusting them against the income made from such apps.
Also Read: Tax on Dividend Income: What You Should Know
Bank Overdraft fees law
An overdraft facility is given to you by the banks when you have a qualifying account for the same. You are also allowed to use an overdraft protection facility where if the primary account doesn’t have enough money then the money can be paid from a linked account, debit card, or some other method. However, some of these secondary payment options need to be agreed upon beforehand, or the financial institutions can’t accept the payments backed by them and cannot charge an overdraft fee for the same.
As per the bank overdraft fees law, the banks cannot just about put anyone up for overdraft coverage. In 2010, the Federal Reserve instructed the banks to reject transactions if the account had insufficient funds. A customer needs to be given an account with default status which they can later change themselves and opt-in for the overdraft coverage facility. If the bank has this service to offer and the customer is willingly signing up for them then the bank can charge them for the same.
In case a mistake occurs then you can always resort to using the process mentioned in the how to get overdraft fees refunded section above. However, the above law only covers transactions that aren’t pre-authorized like a withdrawal or a transaction using a debit card. However, if you have already pre-authorized payments like bills, subscriptions, and other stuff then the overdraft law won’t cover them and you will be liable to pay the overdraft charges as per the usage.
In 2021 a new and improved bill known as the Overdraft Protection Act of 2021 was proposed. As per this bill, it would be illegal for banks to be deceptive or unfair about overdraft coverage.
Banks need to inform the user about the overdraft coverage fee. They also need to mention if a transaction will be declined or passed in case of insufficient funds in the account and also whether the user will be charged for a declined transaction.
The financial institution needs to intimate the user promptly about the account overdraft status. And also the fee needs to be reasonable and acceptable and not a random outrageous and unjustified figure. Also, the bill says that banks can only charge one overdraft charge per month and a maximum of six times a year.
Lastly, once the overdraft coverage fees are paid the banks cannot report negative information to report agencies on the customer’s use of these funds. At the time of writing of this article, the act has been passed and this will see changes implemented in the concerned sphere which means you can now expect to pay no or lesser overdraft charges.