By the Division of Banks
Consumer Alert: Overdrawn Accounts
Sometimes, circumstances may occur that cause consumers to unintentionally overdraw their account or fall a little short. The Division of Banks wants consumers to be aware of the options available to avoid paying high overdraft costs.
For example, if you wrote two $100 checks ($200 total) but did not have enough money in your account to pay them, your depository institution might charge you an overdraft fee ($20-$35) for each item. The company that you gave the check to may also charge you a fee for a returned check ($25-$35) and possibly a late fee. Your fees could be more than $80 for those two checks.
However, there are alternative products you may be able to choose from:
|Overdraft line of credit with the depository institution||A loan attached to your checking account that you can access if you overdraw your account.|
|Link your checking account to your savings account.||Funds automatically transfer from your Savings to your Checking Account when needed.|
|Cash Advance using a Credit Card||Borrow funds through a cash advance and deposit them into your checking account|
Below are the fees typically associated with each option:
Fees / Interest Rate*
|Overdraft line of credit (LOAN)||12% APR|
|Linking Checking Account to Savings Account||$5 Transfer Fee/transfer|
|Cash Advance using a Credit Card||3% Cash-Advance Fee / 18% APR|
* These costs are only examples based on common bank fees and nominal interest rates.
** Cost of specified transaction only; $200 outstanding for 14 days. There may be other fees associated with the account.
Important Points to Remember
- Good account management will save you the most money.
- Ask your depository institution about all the overdraft protection options they offer. Review the options and determine which one is best for you.
- You will be able to make a better decision if you prepare in advance.
- You must “opt-in” to your depository institution’s overdraft protection program for ATM & debit card transactions or these transactions will not be automatically covered.
Massachusetts Division of Banks: http://www.mass.gov/ocabr/docs/bankonit/bank-on-it-10.pdf
Federal Reserve Board (FRB) Consumer Alert: http://www.federalreserve.gov/pubs/bounce/
Consumer Financial Protection Bureau: http://www.consumerfinance.gov/askcfpb/1035/what-is-an-overdraft.html
Additional information may be found on the Division’s website at www.mass.gov/dob. Consumers may also contact the Division's Consumer Hotline at 1-800-495-BANK (2265), ext. 501 for assistance.