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Overdraft Fees: Does Your Bank Stack the Deck?

Dec. 20, 2016
Banking, Banking Basics, Checking Accounts
Overdraft Fees: Does Your Bank Stack the Deck Against You?
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Overdrafts cause some of the steepest fees that bank consumers pay — and some banks have practices that increase your likelihood of being charged. Here’s what you should know.

Jump to table of overdraft practices by bank

Ordering transactions from highest to lowest

Banks don’t have to process your withdrawals, purchases and payments in the order they’re received each business day. A little more than 40% of the U.S. banks surveyed in a 2016 study by the Pew Charitable Trusts process at least some types of larger transactions before smaller ones that clear on the same day. And if your account balance can’t cover all of your transactions, the order in which your bank processes them might affect the number of overdraft fees you pay.

If your bank processes your biggest debit first, and it drains your account, you might find yourself charged an overdraft fee for each additional check or debit card purchase that clears that day. The median overdraft fee is $35, according to Pew, meaning those charges stack up quickly.

» MORE: Overdraft fees by bank

In its analysis of 44 of the nation’s 50 biggest banks, Pew did find that 91% limit the practice of ordering transactions from high to low. Some banks reorder only one type of transaction, such as checks, but don’t reorder online payments or other types.

» MORE: Many banks boost overdrafts by counting big debits first, report says

Overdrafts from ATM and debit card transactions

The same report shows that nearly 80% of the banks surveyed allow accounts to go negative from ATM withdrawals and debit card point-of-sale transactions. Debit card transactions create more overdrafts than any other type of checking account transaction, according to a 2014 report from the Consumer Financial Protection Bureau.

Good overdraft practices by bank

Here’s how the 44 banks Pew analyzed handle three of the overdraft practices included in the report. The more check marks per bank, the more consumer-friendly its overdraft practices. Scroll down to see the full list.

Financial InstitutionNo ATM overdraftsNo debit point-of-sale overdraftsNo or limited high-to-low transaction ordering
Ally Bank
Associated Bank
Bank of AmericaLimited
Bank of OklahomaLimited
Bank of the West
BB&T Bank
BMO Harris Bank
Capital One BankLimited
Charles Schwab Bank
Chase BankLimited
Citibank
Citizens BankLimited
City National Bank
ComericaLimited
Commerce BankLimited
Discover Bank
E-Trade Bank
East West Bank
EverbankLimited
Fifth Third BankLimited
First Citizens Bank
First NiagaraLimited
First Republic Bank
First Tennessee BankLimited
FirstMerit Bank
Frost Bank
HSBC Bank
Huntington Bank
KeyBank
M&T Bank
People's United Bank
PNC BankLimited
Banco Popular de Puerto RicoLimited
Regions Bank
Santander Bank
Signature Bank
SunTrust Bank
TD Bank
Umpqua Bank
Union BankLimited
USAA
U.S. Bank
Webster Bank
Wells Fargo

Spencer Tierney is a staff writer at NerdWallet, a personal finance website. Email: spencer@nerdwallet.com. Twitter: @SpencerNerd.