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Bank accounts have traditionally carried sneaky fees that can add up fast — think overdraft fees, monthly maintenance fees and the like. Now more banks are looking to attract customers accustomed to getting free services, with Discover being the latest to join the no-fees game.
Discover announced today that it has removed all fees on its checking, money market and savings accounts — most notably its $30 insufficient funds fee, which previously applied to customer overdrafts.
Overdraft and insufficient funds fees are typically the most expensive fees that banks charge on deposit accounts, generally around $35 per overdraft, and they can often charge those fees multiple times per day if there’s more than one overdraft transaction.
A Consumer Financial Protection Bureau report in 2017 showed Americans paid $15 billion in fees for bounced checks and other overdrafts the previous year. A NerdWallet analysis of the study found that the 8 million people who overdraw frequently pay an average of $442 a year in overdraft fees.
No charge for overdrafts
Discover customers can apply for overdraft protection and link a savings account that will cover the overage for online bill payments, electronic transfers initiated externally, and checks. Under the new fee structure, Discover customers attempting to make a purchase without overdraft protection will see their transaction rejected without incurring a fee, rather than having the purchase declined and then being charged a $30 insufficient funds fee.
Other fees removed from Discover accounts include:
Stop payment fees, for all accounts.
Excessive withdrawal fees, for money market and savings accounts.
Minimum balance fees, for money market accounts.
Discover’s deposit accounts already came with no monthly maintenance fees.
In recent years, some online banks and credit unions have touted their no-fee accounts to differentiate themselves from traditional fee-charging banks and attract customers looking to optimize their financial products. Allied Credit Union, Ally, Aspiration, Axos Bank and Consumers Credit Union are among the institutions offering accounts with no monthly maintenance fees and other free services.
» See NerdWallet’s choices for best free checking accounts
Deposit account pros and cons
Other benefits of Discover’s deposit accounts include:
CDs with competitive rates.
A large ATM network.
High app ratings.
24/7 customer service.
Some drawbacks of banking with Discover include:
Only one physical branch, in Delaware.
A high $2,500 minimum to open a CD.
» See NerdWallet’s review of Discover