This is used to protect a customer’s account from running below zero, and most banks have this feature.
When your account is below zero, it will cause an overdraft fee or a non-sufficient fee to be charged in your account.
The overdraft charges are usually a way for the bank to cover for you the shortfall of your transactions, and so, they charge you for this service when the transactions go through. This is the reason why you will hear these charges referred to as “courtesy fees.”
NSF usually isn’t covered by the bank, and any non-preauthorized transactions that are made with a check shall return unpaid. The check usually will “bounce.”
Usually, banks charge heavy overdraft fees, and the most common charges are between $30-$35. This is the average in most banks, as a result of insufficient funds.
Key points to note
Overdraft protection will guarantee that your transaction goes through, regardless of whether you have the funds to support such a transaction or not.
You shall be charged for this transaction.
You can have a line of credit for overdraft protection, and in most cases the range is $250 – $5,000 and above.
So, why should you use the overdraft protection option?
You actually will end up suffering plenty of embarrassment as a result of “bounced” checks, and therefore, it is in your best interest if you are a business professional, to enroll in overdraft protection so you do not disappoint your clients.
When you have insufficient funds, it is even more expensive than the $30 or $35 the bank will charge to protect you.
Another thing to consider is that; if you constantly have bounced checks deposited in your account, the bank may decide to close your account all together.
How does it work?
You shall be required to have an agreement in place with the bank. In this case, you as the account holder are allowed to withdraw funds from your account, in excess of what your balance states. This way, charges shall be made and you will repay them in the next deposit.
You may end up paying additional fees if you with for this arrangement to be for continuous protection.
The Chase Bank overdraft protection
The Overdraft Protection from Chase bank is optional, and allows you to link your current checking account with a saving account that has more money. This acts as a backup when you need to pay for transactions that are likely to overdraw your account.
The amount you need to cover these transactions usually is transferred from your saving to your checking account, to cater for the difference.
So, what’s the catch here?
Now, although the bank will say that they shall not charge you any fees for the overdraft protection, you shall pay $5 for transferring from your saving to your checking account. This is applicable everything the process is required to cover you for the insufficient funds.
According to the bank, they will allow you to make one transfer each day, and this amount should be geared towards bringing your checking account balance to zero. If you do not have the funds sufficient for the transaction, i.e. to transfer from saving to checking account, this is where you shall end up being charged $34 to overdraw your account.
This is actually pretty standard – most banks charge the industry average fee of $34. The bank shall not charge you for more than three insufficient fees transactions in one day, which means that the total amount of charges per day is $102.
In addition to this, Chase bank has a 24 hour policy that ensures that you are not charged if your account is overdrawn by only $5.
However, if the account remains in the overdrawn state for more than five days, you shall end up incurring an extra charge of $15 which they call an extended overdraft fee for your account, regardless of how much you may have overdrawn your account by.
Chase Bank Overdraft Practices
The bank’s policy to allow the overdraft transactions is based on their discretion and it is in accordance with your history as a client. They will consider the deposits you make in the account, the number of transactions you average in a month, and whether or not you have a good credit standing with them.
The practice comes in with all of the bank’s checking accounts, except their Chase High School account, and their Chase Secure Checking account.
The cost of the Chase Bank Overdraft protection
When the bank allows your account to overdraw, and you do not have funds in your savings account to bring your balance back to zero, you shall be charged $34.
If you return a check payment then you shall be charged $34, known as the automatic return fee.
The daily limit for overdraft charges is three. And a total of $102 per day.
When is the fee not charged?
When the bank declines to proceed with an overdraft action as a result of a recurring debit transaction.
When your account balance at the end of the day has been overdrawn by less than $5
When you are a Chase bank Private Client.
When you have a Chase Sapphire checking account.
Requesting Chase bank to waive the fees
You can request Chase Bank to waive the Overdraft fee by calling them. You should call them and let them know in advance that you have made a transaction that could potentially overdraw your account. There is a good likelihood if you are their customer that they will offer to refund you some of the fees incurred.
Benefits of having an Overdraft Protection
The best part of having overdraft protection is that; even when you do not have enough funds in your checking account, the check will still clear, your ATM shall always give you money, and any debit card transaction will go through.
You shall not have any more bounced checks, plus you will avoid the inconvenience and embarrassment that goes with it.
This will help you maintain your professional relationships if you are a business owner, plus you will never go without money when you need it.
Limitations of Overdraft Protection
Though this is an excellent way of ensuring that your checks don’t bounce, have a look as the limitations below, before you make this commitment;
Fees and interest rates
This is one of the downsides of the overdraft protection; you shall be charged a transfer or overdraft fee, even if you are using your own money to cover the shortfall. In case you receive an overdraft line of credit, you shall also be required to pay interest on the amount you shall borrow until you pay it back.
Some transactions may still not clear
What a bummer! You have Overdraft protection, and when you issue a check in your insufficiently funded account, it bounces. This mostly happens when your backup source also has insufficient funds.
It’s quite terrible when this happens, and it’s essential to understand that sometimes it does, so keep some cash on hand, or leave enough money on your credit card just in case you have an emergency transaction that needs to clear.
The terms and conditions of overdraft fees vary significantly one bank to another, and if your bank’s fees are high, you can try the Chase Bank Overdraft Protection product as it is an industry-standard.
Most people do not understand why they need to take this up, but when you find yourself in a fix, and urgently in need of clearing a check or making a wire transfer when your account cannot cover the transaction, you will appreciate having overdraft protection.
Chase Bank has made this service available to anyone that needs it, and all you need to do is log on to their website, give them a call, or visit any of their branches, to ensure that your account is covered in case of insufficient funds. For business people, this is a great idea.