Opting out of overdraft protection will save you money!

|
Opting out of overdraft protection will save you money!
Image Credit: Dreamstime
Team Clark is adamant that we will never write content influenced by or paid for by an advertiser. To support our work, we do make money from some links to companies and deals on our site. Learn more about our guarantee here.
Advertisement

Overdraft protection sounds like a great idea— on the surface. If you’re shopping with your debit card and you don’t have the funds to cover the purchase, your bank will cover it for you. While this might seem like a good thing, it comes with a price.

Read more: Banks collect $14 billion from overdraft fees: How to avoid it

A study by the Consumer Financial Protection Bureau found that most overdraft fees are incurred on transactions less than $24 and that the average overdraft fee of $34 is usually paid back in about three days. That’s equivalent of taking a loan with a 17,000% interest rate!

How to avoid the fees

Set up text message alerts

Instead of opting in for overdraft protection you can set up text message alerts from your bank. That way when your account is running low, you’ll know before you make another purchase.

Read more: 4 mobile banking alerts you’ll want to activate right away

Opt out of overdraft protection

The CFBP reports that consumers who opted-in for overdraft protection pay on average $260 per year in overdraft fees compared to just $35 for those without overdraft protection. If you’re already enrolled in overdraft protection don’t worry— just let your bank know you want to opt out. Without overdraft protection your card may get declined but you’ll end up with a lot more money in your pocket in the long run. 

Advertisement
Clark Howard About the author:
Clark Howard is a consumer expert whose goal is to help you keep more of the money you make. His national radio show and website show you ways to put more money in your pocket, with advice you can trust.
View More Articles
  • Show Comments Hide Comments