Overdraft fees are total BS. Luckily, you can actually negotiate your fees away (using a simple script that I’ll provide for you) to beat the banks at their own game.
First, let’s take a super quick look at how overdraft fees really work, as well as well as break down the exact charges you can expect:
Understanding bank overdraft fees
Overdraft fees are a charge from your bank that occurs when you take more money out of your checking account than is currently in there.
Though the fee will vary from bank to bank, here are overdraft fees from a few of the most popular banks as of August 2018:
|Bank of America||$35|
Overdraft fees occur per transaction, which means you can do it multiple times a day. So even though $34 here or $36 there might not seem like a lot, you can find yourself saddled with $100+ in fees if you do it several times a day.
Even if you don’t do it multiple times a day, one overdraft hit is bad enough. In fact, getting an overdraft fee just one time is often enough to wipe out your interest gains for an entire year.
Luckily, you can negotiate to get them waived if you have the right scripts. That’s why I want to show you exactly how you can get your overdraft fees waived with a simple phone call with your bank.
The exact script to get overdraft fees waived
Here’s a truth not a lot of people know: All bank fees are negotiable and can even be refunded.
Chase, Wells Fargo, PNC, even Bank of America understand that people are occasionally forgetful, so they’re very willing to waive a first-time fee if you ask. After the first time, it gets harder but can still be done if you’re determined.
Remember: Your bank wants to keep you as a customer. A well-executed phone call can often make a difference.
Here’s how I was able to waive an overdraft fee I got years ago: I called up my bank and the conversation went like this:
RAMIT: Hi, I just saw this bank charge for overdrafting and I’d like to have it waived.
BANK: I see that fee. Unfortunately, we’re not able to waive that fee. It was [some BS excuse about how it’s not waivable].
RAMIT: Well, I’ve been a good customer with the bank for X years now and would still like to get it waived since this is a rare occurrence. What else can you do to help me?
BANK: Hmm, one second sir. I see that you’re a really good customer. I’m going to check with my supervisor. Can you hold for a second?
I was able to check with my supervisor and waive the fee. Is there anything else I can help you with today?
And just like that, I got my overdraft fee waived. This script works so well for a number of reasons:
- I repeated my complaint and asked the bank rep how they could constructively help me.
- I’ve been a loyal customer to the bank for many years, which you should always use to your advantage when calling to negotiate.
- I was polite but firm. Nothing can force a negotiation to go sour faster than a bad attitude.
You can use this exact script in order to get yours waived too.
And it doesn’t just work for overdraft fees — you can use this for other bank fees too, like processing fees, late fees, and even ATM fees.
For more tactics on negotiations, make sure you check out my article on how to negotiate anything.
What do you do if the bank says no?
But there is always the chance they still say no to your request — and that’s okay. When that happens, there are three options you can take:
- Persist. Banks pay hundreds of dollars in customer-acquisition costs and don’t want to lose you. If you’re persistent enough and make it hard for them to say no, you’ll have the upper hand if they try to shoot you down.
- Hang up and call again. Sometimes getting your fee waived is a matter of hitting the right bank rep. If the first bank rep keeps shutting you out, politely thank them for their time, hang up, and dial the number again.
- Pay the fee. You’re not going to win all negotiations. Sometimes you’re going to have to just pay the fee. BUT if you have the right scripts and prepare, you can be infinitely more ready than you were before.
When it comes to overdraft fees though, the best system is the one where you don’t have to worry about them at all. That’s why I suggest learning how to avoid getting overdraft fees entirely so you don’t have to concern yourself with negotiating the rate away.
4 other ways to avoid overdraft fees
Prevention is better than a cure. So rather than deal with the consequences of overdraft fees, avoid them entirely with these four methods:
- Opt out of overdraft protection
- Account transfers
- Envelope system
- Get a new checking account
1) Opt out of overdraft protection
When you sign up for a checking account, many banks try to convince you to sign up for something called overdraft protection. It’s the policy in which the bank will cover you when you overcharge on your debit card, but charge you the overdraft fee for the trouble.
However, if you choose to opt out of overdraft protection, your card will simply get declined every time you attempt to charge more money than you currently have in the account.
Sure, it might be embarrassing if you’re on a date and it turns out you can’t pay for dinner because your card got declined — but it can go a long way in saving you money on overdraft fees.
2) Account transfers
Some banks offer an overdraft protection service that works by transferring money from another account to the one you’re trying to take money from.
This can be from another checking account, a savings account, or even a credit card (depending on what your bank offers).
For example, say you’re using your debit card to buy dinner. Your debit card is linked to your checking account, which doesn’t have enough money in it. If you have an account transfer set up, it’s okay! If you’ve depleted the money in your checking account, money will just be transferred from your savings to cover the costs.
NOTE: Some banks charge a small fee with this practice as well — though it’ll be much lower than your overdraft fee.
3) Envelope system
This is a great system to help you keep track of your expenses for anything.
And it’s simple: At the beginning of each month, you allocate cash for things like going out, groceries, gas, and whatever else into envelopes. Once you’ve spent the money in those envelopes, you’re done spending for the month.
Of course, if there’s an emergency you can definitely dip into other envelopes — but that only means you have less money to spend in those areas.
You can set up your envelope system in three steps:
- Decide how much you want to spend in each major category each month.
- Put money into each envelope (e.g., $200 for groceries, $150 for eating out, $60 for entertainment).
- Spend the money — but when the envelopes are empty, that’s it for the month.
You don’t even need to use physical envelopes. One of my friends used to track her spending with a separate bank account and debit card, while opting out of overdraft protection.
When the month started, she’d transfer around $200 into the account — and when she went out, she would only spend that money. Once the money was gone, she’d stop spending.
Whatever system you decide to use, you just need to make sure to decide how much you’re willing to spend in each category (and that’s all up to you).
4) Get a new checking account
One great way to avoid overdraft fees entirely is to get a checking account with a bank that doesn’t have them.
My favorite: Charles Schwab Investor Checking.
A few highlights:
- No fees
- No minimums
- No-fee overdraft protection
- Free checks
- Deposit checks via pre-paid envelopes or via iPhone app (snap photos of your check — no need to go into branch)
- An ATM card
- Unlimited reimbursement of any ATM usage
That’s right. There’s no-fee overdraft protection AND unlimited ATM reimbursement.
How often do you go out with friends and have to withdraw money from out-of-network ATMs? How often do you find yourself at a cash-only taco place at 3:30am, needing to withdraw $20, but you hesitate because of onerous ATM fees?
Those fees can add up, and Schwab reimburses you for all of them. If you rack up $200 worth of ATM fees in a month, you’ll see a $200 deposit from Schwab before the month ends. This means you can use ANY ATM — corner stores, other banks, whatever — without having to look for some specific bank’s ATM.
Some people will balk at using Schwab because it’s an online bank. That’s fine, but I urge you to reconsider: It’s rare to find a checking account that (1) avoids screwing you at every turn, and (2) actually rewards you for using them.
Master your personal finances
Once you learn how to avoid getting nickeled-and-dimed by your bank, you’ll be well on your way to living a Rich Life.
And you don’t need any fancy get rich quick schemes or snake oil. All you need is determination and the right systems put in place to help you get the most out of your financial situation and not have to worry about living “frugally” (aka sacrificing the things you love).
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