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Overdraft Fees at Online Banks

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Bank FeesLast week, I wrote about how ING Direct and Everbank offered overdraft protection by way of a line of credit, rather than socking you with overdraft fees. I commented, off the cuff and without doing much research, about how online banks are better than traditional brick and mortar banks about overdraft fees because they aren’t as much a slave to meeting their revenue expectations. I figured it’d be a little unfair if I just left it at that, so I took a look at how online banks deal with overdrafts on their checking accounts.

In general, online banks are cheaper than traditional banks. Some use the same system of fees while some use overdraft protection, charging an interest rate. Some charge one fee regardless of the number of overdrafts in a single day while others hit you for each one. On the whole, online banks are cheaper probably because they can afford to be.

Let’s take a look at some popular online banks and their checking account fees:

Ally Bank

Ally BankAt Ally Bank’s interest checking account, they list the non-sufficient funds fee as $9. It’s a maximum daily fee, rather than a per item fee. When you overdraw, the first $100 in checks will clear. After $100 they may begin to be returned, which is up to Ally Bank. Whether the checks clear depend on the length of time the account has been open and the length of time the account has been overdrawn. You have to bring your balance above $0 within 7 days.

Example: Let’s say you have $50 in your checking account and you write a check for $100. The check would clear, leaving you with -$50. You would also be assessed the $9 fee. Subsequent checks that would bring your account balance under $100 will likely be returned but you wouldn’t be charged an additional $9 fee unless you wrote more checks.

Free Overdraft Protection: If you have both a savings and a checking account, you can call Ally to link the two together. When you do so and overdraw your checking, funds are transfered from your savings to your checking. This service is free.

ING Direct

$25 ING Direct New Account Promotion Self-ServeING Direct’s overdraft protection on the Electric Orange account is a line of credit of up to $500. When you overdraw your account, your checks will still clear but you will be charged interest on your negative balance at ING Direct’s Prime Rate + 4%. There is no set fee per item or per day, just interest on the line of credit. I discussed how the Electric Orange overdraft system worked in the past.

Example: Let’s say you have $50 in your checking account and you write a check for $100. The check would clear, leaving you with -$50. You would be charged interest at their Prime Rate + 4%, which is less than $1 per month.

Everbank

EverBankEverbank is another online bank that uses a line of credit as overdraft protection, with its rate pegged to the Prime Rate, which is lower than the rate ING Direct charges. You can always look at the Prime Rate at WSJ’s Market Data Center, scroll down and look for the “Consumer Money Rates” box (or search for “Prime rate”). It’s also available here (if you don’t want all the noise).

PerkStreet

PerkStreet is one of the few online banks that, at least with respect to overdraft and non-sufficient funds fees, acts like a brick and mortar bank. If you opt into overdraft protection, you’ll be charged $25 per item. If you don’t and overdraw, the non-sufficient funds fee is $23 per item. You can take solace in the fact that the amounts they charge are much lower than brick and mortar banks.

If there are other online banks (they need to have checking accounts so you can actually overdraft) you want me to add to this list, let me know.

(Photo: crazyneighborlady)

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9 Responses to “Overdraft Fees at Online Banks”

  1. moljacks says:

    I just signed up for ING Electric Orange and applied for the overdraft line of credit. They gave me a $2,000 overdraft! I am still surprised and I almost feel like I have another credit card.

  2. Marc Kliner says:

    WOW! Did you see this from ING DIRECT? AWESOME. No FEE Overdraft. Best Bank ever!

    http://ingdirect.com/avoidoverdraftfees

  3. Kate says:

    Looks like I might need to look into either Ally or ING. Just checked my bank of america – they are trying to charge me 4 overdraft fees even though I transferred money this morning to cover the $45 dollars that would be insufficient. This after I checked my account yesterday and nothing was in queue to be debited. Hopefully they will reverse the charges though they are unable to while they are ‘pending.’ ridiculous.

  4. CreditShout says:

    These all seem like great alternatives to what my bank does when I overdraft, which is charge me crazy amounts. I was a loyal customer of this bank for years, and I overdrafted my account one time and was charged! I wish I would have been warned that my balance was so low. Sometimes it is hard to keep track of everything.

  5. That’s pretty impressive that they allow you to avoid overdrafting. There are times when people make mistakes and shouldn’t be held at fault for an accident that happened.

  6. Linda says:

    ING seems to have the best offer, I’ve been using them for savings for quite sometime but have neglected switching all my banking over to them just because I don’t want to go through all the hassles. How ever I think if I start adding up these over draft fees with all their my banks other fees I’d find time to make the switch.

  7. eric says:

    These are definitely better than the ridiculous fees charged by B&Ms. Overdraft fees are among I hate the most.

  8. Ofelia says:

    Didn’t we just bail out the banks?????
    And they still want to charge overdraft, for money the tax payers let them bowrrow?

    I think all these banks are full of it !!!!!
    I went to a bigger bank for more locations, but just more problem!!!!
    >>> Customer Service people suck! Half the time you can’t even understand them. ??????

    I think I’ll change back to my credit union.
    “Never had problems with them”.

    • Mike says:

      Credit union? Bah. My wife’s got both a savings and a checking account at a credit union. We were trying to do a EFT transfer to another credit union (initiated FROM the sending credit union’s website.) Accidentally told it to do it from savings instead of checking (and the savings account didn’t have the money in it.) Instead of simply denying the transfer when it came time for it (it was scheduled for a few days later) they denied it AND charged $32 for an overdraft fee! I could see it if it was initiated from the other CU (that was receiving the money) but when it’s started from the SENDING CU’s site? Simply say “sorry, we can’t do it” and be done with it. That’s exactly how ING would have handled it (needless to say, our main accounts are now all at ING.)


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