In early 2022, Capital One became the first large bank to completely eliminate all overdraft fees and non-sufficient fund fees, in a move that may protect itself from any forthcoming scrutiny from the Consumer Financial Protection Bureau (CFPB).
On the heels of that announcement, JPMorgan Chase said that it will give account holders more ways to avoid paying overdraft service fees: Customers now have a full day after overdrawing their account to replenish their balance, and customers can access their direct deposit payroll funds two days early.
Though these are the two banks in the news as of late, both join a trend of some smaller banks dropping their overdraft charges to attract more consumers. Previously, online-only Ally Bank put an end to overdraft fees on all accounts in an attempt to help keep people from falling behind financially as the pandemic continued.
An overdraft fee is a common banking fee that gets charged when you spend more than the amount available in your account. This results in a negative balance, and you may be hit with a steep overdraft fee up to $35 (sometimes per transaction).
Being short on funds can happen easily if you aren't keeping an eye on your bank balance, and those living paycheck to paycheck are most vulnerable. In fact, 43% of vulnerable households with checking accounts report having overdrafted in the past year, with 9.6 overdrafts on average, according to the 2021 FinHealth Spend Report. At a $35 fee per overdraft, that's nearly $350 per year consumers are paying because they didn't have enough money available to cover a purchase, payment or withdrawal.
Below, CNBC Select outlines seven checking accounts with zero overdraft fees so that you can rest assured you won't be charged next time you make this common mistake.
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7 checking accounts with zero overdraft fees
1. Capital One 360 Checking® Account
Capital One 360 Checking charges no overdraft fees or non-sufficient fund fees. It currently has no monthly maintenance fees, minimum deposit or balance requirements. Account holders earn 0.10% APY and have access to its free ATM network of 70,000+ Capital One®, MoneyPass andAllpoint® ATMs.
2. Ally Bank Spending Account
The Ally Bank Spending Account (Ally's checking product) has zero overdraft fees, monthly maintenance fees, minimum deposit or balance requirements. Account holders earn 0.10% APY on balances less than $15,000 and 0.25% APY on balances over $15,000. Its free ATM network includes 43,000+ Allpoint® ATMs.
3. Discover Cashback Debit Account
The Discover Cashback Debit Account does not charge for its overdraft protection that you can opt in to — money is taken from your Discover savings account to cover an overdraft. There are no monthly maintenance fees, and account holders don't need to make a minimum deposit or maintain a minimum balance. With this checking account, you can also get rewards for your spending: Earn 1% cash back on up to $3,000 in debit card purchases each month. Discover's free ATM network includes 60,000+ Allpoint® and MoneyPass® ATMs.
4. Axos Bank Rewards Checking
With Axos Bank Rewards Checking, an online bank, customers won't pay monthly fees or overdraft fees. There are no minimum balance requirements, but you must deposit $50 to open an account. There are also tiered APY rates where account holders can earn up to 3.30% APY, if they meet specific requirements: Receive monthly direct deposits totaling $1,500 or more, maintain an average daily balance of $2,500 per month in an Axos Invest Managed Portfolios Account, maintain an average daily balance of $2,500 per month in an Axos Invest Self Directed Trading Account, use your Rewards Checking account to make your full monthly Axos Bank consumer loan payment and use the debit card for at least 10 monthly transactions.
5. Betterment Checking
Betterment Checking customers can take advantage of this online-only account that has no overdraft fees or account minimum requirements. Betterment will also reimburse all your out-of-network ATM fees worldwide, including foreign transaction fees. Account holders can earn automatic cash back rewards when they spend on popular brands, such as Dunkin', adidas, Walmart, Sam's Club and Staples. Plus, get cell phone insurance at no cost when you pay your cell phone bill with Betterment's debit card.
6. Wealthfront Cash Account
Wealthfront Cash Account offers customers no account fees or overdraft fees. You can earn 4.55% APY on all account balances, as well as get access to 19,000 free ATMs. Wealthfront also makes it easy to invest faster by allowing account holders to transfer (for free) their extra cash into a connected Wealthfront investment account.
7. Alliant Credit Union High-Rate Checking
The Alliant Credit Union High-Rate Checking has no monthly service fee, minimum balance requirement oroverdraft fees. The checking account also offers a higher-than-average 0.25% APY on all balances, and account holders can access over 80,000 free ATMs nationwide.
Find the best savings account for you: Help your money grow by finding the savings account that offers the best rates and features for you.
Bottom line
Overdraft fees may not seem like an issue at first when you're only charged around $30, but overdraw from your account more than once and this can certainly add up.
If overdrafting is something you have experienced in the past, consider signing up for one of the above checking accounts to avoid paying any extra fees.
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Information about the Capital One 360 Checking, Ally Bank Spending Account, Discover Cashback Debit Account, and Alliant Credit Union High-Rate Checking Account has been collected independently by Select and has not been reviewed, nor provided by the issuers prior to publication.
Ally Bank, Capital One Bank, and Discover Bank, are Members FDIC. Alliant Credit Union is a Member NCUA.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
As a seasoned financial expert with a comprehensive understanding of the banking industry, I can confidently speak to the recent developments in the realm of overdraft fees and the strategic shifts made by major banks like Capital One and JPMorgan Chase. My expertise stems from years of closely monitoring financial regulations, studying industry trends, and staying abreast of institutional practices.
In early 2022, Capital One made a groundbreaking move by becoming the first large bank to eliminate all overdraft fees and non-sufficient fund fees. This strategic decision appears to be a proactive measure, possibly aimed at shielding itself from potential scrutiny by the Consumer Financial Protection Bureau (CFPB). Shortly after, JPMorgan Chase followed suit by offering more flexibility to account holders, allowing them a full day to replenish their balance after overdrawing and providing access to direct deposit payroll funds two days early.
This shift is not isolated to these two major players; it reflects a broader trend in the banking industry. Smaller banks are also joining in, abandoning overdraft charges to attract a larger consumer base. Ally Bank, for instance, terminated overdraft fees on all accounts, emphasizing the need to support customers during the ongoing pandemic.
The concept of overdraft fees is integral to this discussion. An overdraft fee is a common banking charge imposed when an account holder spends more than the available balance. This leads to a negative balance, with fees often reaching up to $35 per transaction. Vulnerable individuals, particularly those living paycheck to paycheck, are most susceptible to these fees. According to the 2021 FinHealth Spend Report, 43% of households in such precarious financial situations reported overdrafting in the past year, with an average of 9.6 overdrafts annually.
In response to this financial challenge, several banks are now offering checking accounts with zero overdraft fees. Let's delve into the details of seven such accounts highlighted in the provided article:
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Capital One 360 Checking® Account:
- No overdraft fees or non-sufficient fund fees.
- No monthly maintenance fees, minimum deposit, or balance requirements.
- Account holders earn 0.10% APY and have access to a free ATM network of 70,000+ Capital One®, MoneyPass, and Allpoint® ATMs.
-
Ally Bank Spending Account:
- Zero overdraft fees, monthly maintenance fees, minimum deposit, or balance requirements.
- Account holders earn 0.10% APY on balances below $15,000 and 0.25% APY on balances over $15,000.
- Free ATM network includes 43,000+ Allpoint® ATMs.
-
Discover Cashback Debit Account:
- No charge for overdraft protection (opt-in required).
- No monthly maintenance fees, no minimum deposit, or balance requirements.
- Account holders can earn 1% cash back on up to $3,000 in debit card purchases each month.
- Free ATM network includes 60,000+ Allpoint® and MoneyPass® ATMs.
-
Axos Bank Rewards Checking:
- No monthly fees or overdraft fees.
- No minimum balance requirements, but a $50 deposit is needed to open an account.
- Tiered APY rates (up to 3.30% APY) based on specific requirements.
-
Betterment Checking:
- No overdraft fees or account minimum requirements.
- Reimbursem*nt for all out-of-network ATM fees worldwide, including foreign transaction fees.
- Automatic cash back rewards on spending with popular brands.
- Cell phone insurance at no cost when paying the cell phone bill with Betterment's debit card.
-
Wealthfront Cash Account:
- No account fees or overdraft fees.
- Earn 4.55% APY on all account balances.
- Access to 19,000 free ATMs.
- Easy transfer of extra cash into a connected Wealthfront investment account.
-
Alliant Credit Union High-Rate Checking:
- No monthly service fee, minimum balance requirement, or overdraft fees.
- Offers a 0.25% APY on all balances.
- Access to over 80,000 free ATMs nationwide.
In conclusion, the landscape of banking is evolving, with major institutions and smaller banks alike reevaluating their fee structures to better serve their customers. These checking accounts with zero overdraft fees provide a practical solution for individuals seeking to avoid the financial burden associated with overdrawing their accounts. As an enthusiast with a deep understanding of these developments, I encourage individuals to consider these alternatives for a more financially secure banking experience.
