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If you're guilty of overdrawing your checking account, one bank is introducing a choice for how you pay when they cover for your purchases.
TCF Bank announced yesterday that it will begin offering account holders the ability to choose between two types of overdraft protection: a per-item fee of $37 and a per-day fee of $28.
While the lower fee obviously looks like a better solution, that's not always the case. Late last year, I wrote about a teen with a TCF account who managed to amass almost $230 in bank fees. The per-item structure would have eliminated much of the pain of this situation. Rather than being charged each day for irresponsible money management, the customer would have simply had one $37 charge on his account.
While choices are always good, the best choice for overdraft protection is to simply know how much is in your checking account at all times. For customers who still drain their checking accounts to the bottom of the barrel, I still recommend steering clear of any per-item or per-day based fees. They add up very quickly.
Instead, if you're truly concerned about overdrawing your account, many banks and credit unions can link your checking account to your savings account or credit card to cover any overdrafts. There is typically still a fee for this service, but the cost is much lower. I've seen most banks offer this type of service for around $10 to $15 for an overdraft. Of course, that plan comes with a note of caution, too. Do not let overdraft fees pile up on your credit card where you'll be hit with a double-whammy: fees that grow even larger due to interest rates.
We've all voiced our frustration over monthly fees for checking accounts, but overdraft fees are entirely up to the account holder. Instead of allowing for the possibility to be charged an extra $35, you can just choose to not enroll in the service. If you have a history of forgetting how much is in your account, sign up for free text alerts when your balance crosses a certain threshold.
What do you think? Have you enrolled in overdraft protection at your bank?
I'm from the school of thought that you don't spend more than you have in your bank account, so I have never enrolled in overdraft protection. The approach taken by TCF Bank of giving customers a choice allows them to utilize the pricing structure that's right for them. That's a positive step toward creating a better customer experience. It will be interesting to see whether the new structure will serve customers well.