You’re opening a checking account at the bank, signing and initialling. You get to the overdraft protection page—would you like to opt in? The banker likely tells you it’s in your best interest to opt in, but he or she likely doesn’t tell you it’s in the bank’s best interest for you to opt in.
To overdraft means you don’t have enough money in your account to cover an ATM withdrawal, debit purchase, online payment, or transfer.
If you opt into overdraft protection, you give the bank permission to pay for your transaction when your balance falls below $0, and then they charge you a hefty fee for doing so. The average overdraft fee is $34.21, according to Cushion’s analysis of more than one million overdraft fees. While there is a limit to how many overdraft fees the bank can charge you each day, you could still end up paying hundreds of dollars.
The FDIC reported that in 2019 U.S. banks made $233.1 billion in net revenue—or the amount after expenses, taxes, and other costs. The Center for Responsible Lending estimates nearly 5% of that can be attributed to overdraft-related fees, or more than $11 billion. Now does it make sense why banks would want you to opt in?
Luckily for account holders, it became mandatory in 2010 for banks to require customers to opt in before charging overdraft fees. Opting in still seems to be the default for people, but it’s not always the right choice. Cushion negotiates dozens of credit card and bank fees, more than 30% of which are allocated to overdraft-related fees.
Your own financial needs and spending habits should determine whether or not you opt in. Here are some things you should consider.
So should you opt in or not? Like most things related to finances, it’s entirely dependent on your own situation.
Consider opting in if…
Consider not opting in if…
Cushion negotiates bank and credit card fees so you waste less money, save more, and live a financially healthier life. It’s your money after all, and we’re here to help safeguard it. Since Cushion’s launch in 2018, our customers have received more than $2 million in refunds. We leverage artificial intelligence, advanced fee-detection technology, and bank-level encryption to put money back into your account—quickly, efficiently, and securely. More than that, we equip you with the tools for success by providing the most up-to-date data and insights in banking, news, and financial wellness.