It’s not just about monthly maintenance fees anymore. Many major banks, including SunTrust Bank and U.S. Bank, are increasing their overdraft fees too. You’ll never notice if you always have enough money in your account, but not everyone is that lucky. Overdraft fees have the unfortunate side effect of punishing a bank’s poorest customers for not having money. You’re ultimately responsible for managing your own account, of course, but the truth is many people don’t understand how overdraft fees work. Additionally, many financial institutions offer alternative overdraft programs that are way less expensive, but rarely publicized. At NerdWallet, we’re looking to change that, starting now. In this article, you’ll find a general explanation of overdraft fees, and a list of credit unions that offer awesome alterative programs and free checking. Read on!
How traditional overdraft programs work
If you overdraw your account and are signed up for overdraft protection, the bank can choose to make payments for you and charge you a fee for the privilege. This fee may be called an overdraft fee, but since there’s no industry standard term, you’ll sometimes see it called an insufficient funds fee, a courtesy pay fee, or something similar. You’re ultimately responsible for the cost of both the item and the fee, every time. Legally, there is no limit to the number of overdraft fees a bank can charge you, and they are not required to notify you when it happens. You are responsible for keeping track of your own account balance and paying any necessary fees. Better financial institutions will notify you of these fees up front, or make their list of fees (often called the “fee schedule”) easy to find on their website.
If you use an overdraft protection program, you’re essentially borrowing money you don’t have, and you’re going to have to pay for the privilege on top of that. The best thing you can do is not overdraft your account at all. Thanks to legislation passed in 2010, all overdraft programs are now opt-in only. No financial institution can sign you up for an overdraft protection program without your consent. However, if you’re still interested in overdraft protection, it’s good to know what your options are. You can protect yourself for considerably less money by signing up for an alternative overdraft protection program.
Alternative overdraft programs
Rather than pay items for you, some credit unions will allow you to automatically transfer overdraft amounts to your credit union credit card, or withdraw funds from a linked account, typically a savings account or money market account. Others will let you apply for a line of credit to cover overdraft costs. This might be a special line of credit just for overdrafts or another line of credit you’d establish for other reasons, such as a home equity line of credit. The credit unions listed below all have at least one of these options in conjunction with a free checking account (no monthly maintenance fees or minimum balance requirements). Almost all of these services have a per-transaction fee, but you’ll see very quickly that they’re much cheaper than traditional overdraft fees, which are generally $30 or more.
Centra Credit Union (Columbus, IN)
Centra Credit Union has locations throughout Indiana, as well as a New York branch (Jamestown) and a North Carolina branch (Whitakers). They offer 4 different overdraft options. You can transfer money to a home equity line of credit or LoanLiner loan to cover an overdraft amount for no additional cost. If you choose to transfer money from a savings or money market account, each transfer is only 50 cents. In addition to a free checking account, Centra Credit Union also offers a second chance checking account called Opportunity Checking with no minimum balance requirement. Residents of most Indiana counties qualify for membership at Centra. Please see their membership page for complete details.
Unitus Community Credit Union (Portland, OR)
Unitus Community Credit Union has 8 locations in Portland, Salem and surrounding cities. There’s no fee for overdrafts if you transfer funds from your savings account or money market account. Unitus also offers overdraft transfers from your Unitus Visa, KWIK Line of Credit or Home Equity Line of Credit for $3 per transaction. Their standard checking account has no minimum balance requirement or monthly fee. Residents of Washington State and 16 nearby counties in Oregon qualify for membership at Unitus. Please see their membership page for complete details.
Silver State Schools Credit Union (Las Vegas, NV)
Silver State Schools Credit Union has locations throughout the greater Las Vegas area. Overdraft money transfers from your savings account cost $3.50 each, up to six times per month. Silver State’s free e-Checking account has no minimum balance requirement, no minimum opening deposit, and no monthly fee when you make your transactions at an ATM or online. Credit union membership is primarily open to people associated with the Nevada educational community. However, this includes students, volunteers and administrative staff. You also may join by becoming a sponsor of Vegas PBS. Please see Silver State’s membership application for complete details.
Altura Credit Union (Riverside, CA)
Altura Credit Union has locations in Riverside, Indio, Hemet and surrounding cities. Their overdraft protection program lets you link your checking account to a savings account, credit union credit card, or even both. In that case, they’ll use your savings account first, then default to your credit card if that runs out. Their iChecking account has no minimum balance requirement and no monthly fee. If you can’t qualify for a regular checking account, Altura offers a second chance checking account called Renew Checking. There’s no minimum balance requirement, and you can upgrade to a regular account after only 6 months of good behavior. Membership is open to anyone who lives, works, attends school or worships in Riverside County, San Diego County and select cities of Orange County. See Altura’s membership eligibility page for complete details.
Alabama Credit Union (Tuscaloosa, AL)
Based in Tuscaloosa, Alabama Credit Union has 19 locations statewide. They offer an overdraft line of credit loan upon approval. There is no additional fee to make overdraft transfers via this method. We especially like Alabama’s Mobile ACUiBranch app, which allows you to monitor account activity from your smart phone and prevent overdrafts. Their Free Checking account has no minimum balance requirement and no monthly fee. Members of select employee groups and residents of 16 nearby counties qualify for credit union membership. Please see Alabama’s membership page for complete details.
America First Credit Union (Riverdale, UT)
Although they’re based in Riverdale, America First Credit Union has locations throughout Utah. You have the option to open a line of credit to cover overdraft fees. Their free checking account has no monthly fees and no minimum balance requirement. Membership is open to anyone who lives, works, attends school, volunteers, or worships in Salt Lake, Utah, Juab or Clark counties. Members of select employee groups and others may also join: please see America First’s membership page for complete details.
Columbia Credit Union (Vancouver, WA)
Columbia Credit Union has 14 locations in Vancouver, Battle Ground, Ridgefield and Washougal. Transfers from linked accounts are just $3 per transfer in increments up to $100. You can also link your checking account to a savings account, money market account, personal line of credit, or home equity line of credit to prevent overdraft fees. Columbia also encourages their members to check out their overdraft FAQ page to avoid them in the future. Their Free For All checking account has no minimum balance requirement or monthly fees, and comes with a free online budgeting tool. Credit union membership is open to anyone who lives or works in Washington State, or Jantzen Beach/Hayden Island, Oregon.