Reasons for Refusing Overdraft Protection
The overdraft protection policy differs from bank to bank. Some may be worth it, but other policies may still cost you dearly. According to a NerdWallet survey , 66 percent of people don’t realize that you can opt out of overdraft protection.
When you overdraft in a bank account, your bank usually charges a fee for insufficient funds. Overdraft protection can come in handy for these purchases, but there is usually a fee for the transfer (although some banks protect you for free). But here’s the thing: you can opt out of overdraft protection for one-time debit card transactions and ATM transactions.
“A lot of people use overdrafts a lot, so it makes sense for this group of people to give them up especially,” said Kimberly Palmer, resident loan expert at NerdWallet. “Instead of using your savings, your transactions will be rejected.”
Yes, it can be a little embarrassing, but if you rely on overdraft protection to fund your overspending problem, giving up may be the best option. However, there is a big caveat here: enabling or disabling overdraft protection does not apply to automatic invoice payments or checks. They can still go through and you still have to pay a transfer fee. However, this is generally cheaper than underfunding fees or check returns.
Overdraft protection policies vary and they can be confusing, so make sure you know what you’re getting into before you agree and make sure you know what you’re getting out of if you decide to skip it. If you’re struggling to manage your spending, consider opting out of overdraft protection and set up low balance alerts from your bank instead. Read more about overdraft fees and protection policies in the NerdWallet post here .