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What are Overdraft Fees? (Should I Get Overdraft Protection?) - YouTube
Channel: Ready Set Life Financial Coaching
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How freaking terrible is it that banks
can charge us for not having money in
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our accounts if you've never been hit
with an overdraft fee count yourself
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lucky you don't know the pain but if you
have you'll know how frustrating it is
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to find out the banks are quite happy to
just add on extra fees and charges on
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top of your already incredibly low or
non-existent balance today I'm going to
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talk about these terrible charges called
overdraft fees if there's anything I've
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learned from researching this video it's
that overdraft fees are confusing a F
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but I'm gonna do my best and let you
know everything that I found the types
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of overdraft fees that you might face
the mystery of overdraft protection and
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whether you should actually get it banks
are constantly trying to sell you this
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and most importantly what to do to avoid
the whole overdraft thing altogether
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welcome to the ReadySet life at YouTube
channel my name is Bernie and I'm a
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millennial financial coach who makes
videos all about taking the fear out of
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finance make sure you hit that like
button if you enjoyed this video and
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subscribe if you haven't already new
videos come out every single Thursday
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and you don't want to miss them there
are tons of fees and charges to talk
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about when it comes to banks but one of
the most frustrating fees is the
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overdraft fee it's a fee that not a lot
of people find out about until they're
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actually hit with one for me I was hit a
lot in my high school days I used to get
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hit with an overdraft fee like every
week terrible I know but I used to be
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super disorganized with my finances but
it happens to a lot of people as I
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mentioned a lot of people don't even
know that this fee exists until it
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happens to them so what do you need to
know when it comes to overdraft fees
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first let's explain what overdraft
actually means
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overdrafting is when you try and take
out more money than you have in your
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account you can over drop by swiping or
tapping a debit card for an amount
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that's larger than the balance of your
account writing a check with an amount
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that's larger than what's in your
account trying to withdraw more cash
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than you have in your account at an ATM
or having a pre-scheduled automatic
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payment try and go through that's larger
than the amount that's in your account
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basically anything that you try and do
in your account if you don't have enough
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of a balance to do it you'll be in
overdraft when this goes down two things
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can happen you either get an NSF fee on
non-sufficient funds fee or you get hit
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with an overdraft fee if you don't have
overdraft protection your card and
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payment will be rejected and you'll get
an NSF fee in Canada the average NSF fee
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is about $45 and in the state it could
range anywhere from 27 to 35 yep that
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means if you swipe your debit card for
say a $5 coffee but only have two
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dollars and 50 cents in your account it
can turn into a $50 coffee what's worse
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is that the banks can charge this
multiple times a day so if you swipe
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that card and then also had a couple
automatic payments could try and go
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through that you forgot about you could
be charged upwards of a hundred and
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fifty dollars in extra fees usually
banks set a daily limit on charges like
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this but from what I've researched that
limit is almost always over a hundred
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dollars a day and on top of this if you
don't notice within the first day it
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could be two or three hundred dollars by
the time you actually notice that it's
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happening in your account so how do you
avoid charges like this
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that's where overdraft protection comes
in now I have to give a little bit of a
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warning here I'm a bit biased on this
when I was over drafting my account of
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course the bank's teller convinced me
that I needed over doc protection and I
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paid for the useless fee for a long time
I didn't really understand what it was
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when she was trying to sell it to me so
I said okay fine trusting that she had
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my best interests at heart but it ended
up being a fee that I never used after
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that when I finally realized what it was
I cancelled it but as soon as I did each
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time I went into the bank I was given
that whole overdraft speech because they
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must have seen on my file that I had
opted in before there was also a time
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for awhile where I was paying that over
got protection fee without
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my opt-in consent it was a whole thing
with TV I'll link an article down below
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so yeah overdraft protection is a little
bit of a touchy subject for me but I'm
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gonna do my best to explain it as open
and not judging as possible because I
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believe that we all have the
responsibility and right to make the
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financial decisions that best fit with
our lives regardless of what everyone
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else thinks so what exactly is over -
protection
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when you have overdraft protection those
charges that you make when you don't
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have enough funds actually get accepted
making your account negative you still
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get a charge but it's usually lower than
what you'd pay with an NSF fee banks do
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this in a few different ways sometimes
it's a monthly fee called an overdraft
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protection charge and that's added
regardless of if you overdraft in that
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month or not that's the type of fee that
I was being charged while banking @tv
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other times it's a charge called an
overdraft charge and that's added every
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time that you overdraft your account so
you could be paying it multiple times a
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day or multiple times a month and it
would just be cheaper than at NSF fee
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but depending on how many times you
overdrafted your account it could end up
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more expensive than an NSF fee in these
cases you'd be paying back the amount
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that you are owed as well as the fees
added and sometimes additional interest
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fees depending on how long it takes you
to pay back their balance another option
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that sometimes available is overdraft
protection by linking account if you
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overdraft in your checking account
linking the accounts would actually
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allow the bank to take from a different
designated account for the money which
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can be either checking or savings or
sometimes it can even attach to a credit
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card or a line of credit of course if
there is enough money and those accounts
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either then you're still borrowing from
the bank and there are of course fees
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every time that the bank makes those
transfers for you but sometimes this
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option is better for saving on those
interest fees so how do you know if
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overdraft protection is the right option
for you
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if you find yourself overdrafting on a
regular basis and you're paying a crap
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ton of NSF fees getting overdraft
protection is better than nothing if
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it's between NSF fees or overdraft
protection then yeah over got protection
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is cheaper but my personal stance as
well as my professional opinion as a
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financial coach is that you shouldn't be
paying any of those fees you should
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never be overdrafting in the first place
I know time for some tough love here but
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come on just save yourself the headache
and stress here are a few ways to avoid
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over drafting your account
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the first is low balance notifications
every bank I know has a free service
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that you can opt-in to let you know if
you have a low balance on your account
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sometimes it's an email or if the bank
has an app they can let you know by push
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notification on your phone just Google
your bank to find out or contact them to
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ask that way you'll always know when
your account goes below a certain amount
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the second way to avoid overdraft fee is
check-ins no you don't need to check
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your bank account every single day there
are two ways to do this if you're into
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daily check-ins then by all means go for
it and that will totally help but I also
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don't want to force you to obsessively
think about your accounts all the time a
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check in with your accounts once a week
or a few times a week will at least give
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you an idea of where you're at with
everything if during your check you see
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a lower than normal balance then you'll
know to slow down your purchasing and
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check more often to make sure that
you're not over drafting as I mentioned
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banks can charge these fees multiple
times a day so even one day a wall for
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drafting can make a huge dent in your
accounts the third way to avoid
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overdraft fees is tracking your auto
payments knowing exactly what Auto
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payments are coming out and when they're
coming out is essential to actually
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staying on top of overdraft the top
reason that people get into overdraft in
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the first place isn't because they don't
know the balance of their accounts it's
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that they're not tracking all the money
coming in and out of those accounts it's
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super easy to think you have enough
balance to make a purchase
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but then forget about the other things
that you bought that day the auto
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payments that you scheduled three weeks
ago or those little $2 ATM fees that add
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up so quickly I'm gonna link my video on
being responsible with your money up in
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the cards this will really help you
understand how to actually plan for
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these expenses and how to track them and
one last tip don't be afraid to ask your
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bank for a refund for these charges
often they will especially for a first
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offense banks are usually willing to
work with you on reimbursing fees like
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this it never hurts to ask
thanks for watching today's video let me
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know in the comments down below have you
ever been hit with a mystery fee in your
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bank account and did you ask the bank to
reimburse it if you liked this video
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don't forget to give it a thumbs up and
make sure you subscribe to this channel
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because next week I'm going to be
pulling back the curtain on the
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financial world demystifying even more
confusing financial jargon see you next
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Thursday
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