Getting a handle on bank overdraft fees

Photo: Andre Taissin/Unsplash
Overdraft fees can break your piggy bank. To help their customers, some financial institutions have increased their flexibility with regards to how and when overdraft fees are accessed and when funds are unavailable in an account.

StatePoint Media -- When your bank account balance is low, life can be stressful. For example, when it’s time to pay large expenses that can’t wait, like car loan payments or monthly rent, it’s all too easy to overdraft a bank account. This is especially true if you don't have a ready line-of-credit or a savings account you can dip into in an emergency. The current rate of inflation in the United States doesn't make it any easier either.

In fact, U.S. consumers pay billions of dollars a year in overdraft fees for covering all types of purchases, both large and small.

There is no doubt that overdraft fees serve as a pain point for many consumers, and as the issue of overdraft continues to be discussed and debated, several banks have taken different approaches in response.

Some have taken steps to address overdrafts, mostly by eliminating fees or eliminating the ability to overdraft completely.

Alternatively, PNC Bank now offers a solution that provides customers with greater control in these circumstances. Low Cash Mode, a tool that offers transparency and choices to help customers avoid fees by managing low-cash moments or mistimed payments, is a feature available in the PNC Virtual Wallet account through the PNC Bank Mobile app.

The feature notifies you when your available balance is near or below zero and gives you at least 24 hours (and often more) to bring a negative balance to at least $0 through a deposit or funds transfer before incurring a fee. It also gives you the choice of whether to pay or return certain pending checks and electronic payments when your balance is nearing negative territory.

The Value of Overdraft

The ability to choose to overdraft can help consumers avoid bigger repercussions like credit impacts and loss of access to banking that unpaid bills or late payments can cause. Allowing customers to make their critical payments – albeit for a small fee – sometimes makes a difference that helps allow them to stay in the banking system.

For example, if you opt to pay your rent or car payment – and avoid a penalty or a negative impact to your credit score by simply paying an overdraft fee – then the option to overdraft has provided a value.

“Removing the ability to overdraw an account doesn’t address the fact that many customers need to pay bills, even during temporary cash shortfalls,” says Alex Overstrom, head of Retail Banking at PNC Bank. “The key is that the consumer should be making the decision to incur or avoid fees, not just the bank.”

Control Pays Off

This level of control has demonstrated real results. PNC reports that 64% of customers who have a negative-balance event cure their account in time to avoid incurring a fee.

“Sometimes people just need a little more time to cover important expenses,” says Overstrom. “And in these moments, they should have choices to make things right.”