How much overdraft does Bank of America allow?

NEW YORK (AP) — Bank of America is slashing the amount it charges customers when they spend more than they have in their accounts and plans to eliminate entirely its fees for bounced checks.

It’s the latest move by the nation’s biggest banks to roll back the overdraft fees they long charged customers, fees that often amount to hundreds of dollars a year for frequent overdraft users.

The bank based in Charlotte, North Carolina, will cut the overdraft fees it charges customers to $10 from $35 starting in May. It will also stop charging fees for non-sufficient funds — which are levied when it rejects a transaction — better known as bouncing a check.

While checks are no longer widely used, NSF fees can come from automated payments like utility bills. Bank of America, the nation’s second-largest bank, says roughly 25% of its overdraft/NSF fee revenue each year came from NSF fees.

Bank of America minimum wage: Bank of America to boost minimum wage to $25 an hour for its employees by 2025

Altogether, Bank of America estimates the steps will cut its overdraft-fee revenues by 97% from where they were in 2009, the year before it started taking incremental steps toward reining in overdraft-fee revenues.

“This is the final step in the journey we’ve been on,” said Holly O’Neill, president of retail banking at BofA, in an interview. “We have good financial solutions for clients without them having to rely on overdraft, but we will still have overdraft if it is needed.”

For years, it was common that one large bank would increase the fee it was charging for overdraft, which would cause other banks to respond in kind. It remains to be seen whether the decision by BofA — a leader in the retail banking industry — to cut overdraft fees will pressure other banks to take similar measures.

The bank is also eliminating two smaller fees as well. It will no longer allow customers to overdraft their accounts at the ATM and will eliminate a $12 fee it charged customers when the bank automatically moved money from one account to another to avoid an overdraft, often moving money from a long-term savings account into the customers’ primary checking.

Overdraft has its origins in banks providing a service for a fee to customers who may have not balanced their checkbook correctly and wanted a bank to honor a purchase. But the widespread use of debit cards changed this courtesy into a routine source of revenue for banks. If a customer lacked funds in their account, a $5 coffee could end up costing $35 because of overdraft fees.

Overdraft fees: Overdraft fees hit lower-income Americans hardest. Will other banks follow Ally in ending them?

Overdraft fees became lucrative for the industry but at the same time made banks a target for consumer advocates and regulators. After the financial crisis, Democrats put the Consumer Financial Protection Bureau and other regulators in charge of reining in overdraft fee revenue.

For years, BofA has slowly cut back on its overdraft fee practices. It got rid of overdraft fees tied to debit card purchases in 2010 and created a checking account in 2014 that did not allow customers to overdraft. The SafeBalance account is now the bank’s most commonly opened account.

But BofA and the broader industry were not ready to get rid of overdraft fees altogether until recently. Many banks froze the fees they charged customers during the first year of the pandemic and industry still booked record profits.

So starting in 2021, some larger banks started announcing they were dropping overdraft fees entirely. Ally Bank, PNC, Santander and Capital One were among the bigger regional banks to effectively eliminate overdraft fees.

Bank of America issues you an overdraft fee (overdraft item fee) when you don’t have enough money in your account to complete a transaction but the bank pays for the transaction anyway. This will cause your account to have a negative balance, and you will incur a fee on top of it.

Transactions that can trigger an overdraft item fee include:

• Checks or other transactions made using your checking account number
• Recurring debit card transactions (e.g. gym memberships, streaming service subscriptions)
• ACH transactions
• Online or automatic bill payments (e.g. auto-pay utility bills, credit card payments)

Bank of America can cover other types of overdraft transactions, but you first have to opt into overdraft protection. In addition to the transactions covered by the overdraft item fee, other types of transactions covered by overdraft protection include:

• Everyday, non-recurring debit card transactions (gas, groceries, etc.)
• ATM withdrawals

Bank of America is not obligated to cover any transactions that overdraft your account, regardless of transaction type or overdraft protection status. The decision is ultimately at the bank’s discretion.

How Much Does an Overdraft Fee Cost at Bank of America?

Bank of America charges $35.00 per overdraft fee.

The fee only applies to transactions that cause you to overdraft your account by more than $1.00. For example, if you make a purchase and your account only falls to -$0.50, you will not incur an overdraft fee.

If you overdraft your account, a number of scenarios could occur:

1. Overdraft item fee
2. Overdraft protection transfer fee
3. NSF/Returned item fee

Overdraft item fee

Overdraft item fees most often occur when you are not opted into overdraft protection and the bank allows you to overdraft your account on checks; recurring debit card transactions; ACH transactions; or online or automatic bill payments. 

Overdraft protection transfer fee

Overdraft protection transfer fees most often occur when you are opted into overdraft protection and the bank allows you to overdraw your account on checks; recurring debit card transactions; ACH transactions; online or automatic bill payments; everyday, non-recurring debit transactions; or ATM withdrawals. Rather than a $35 overdraft fee, Bank of America will charge a $12 overdraft protection transfer fee if you are opted into the program. To enable overdraft protection, you must link a qualified account so that the bank can transfer funds from one account to another in the event of an overdraft. Qualified accounts include: 

• Savings or secondary checking account
• Line of credit
• Credit card

NSF fee

A non-sufficient funds fee—or returned item fee—occurs when you make a purchase but there are not enough funds in your account to cover the transaction. Instead of covering for you, the bank will decline the transaction, or return the item unpaid. Bank of America charges $35.00 for each transaction that causes you to overdraft your account by more than $1.00. The bank will not charge you an NSF fee for ATM or debit card transactions, but can charge you a fee for:

• Checks or other transactions made using your checking account number
• ACH transactions
• Online or automatic bill payments (e.g. auto-pay utility bills, credit card payments)

Bank of America limits the number of overdraft fees—including both overdraft item fees and NSF fees—to 4 on a single day.

Some accounts, such as the Bank of America Advantage SafeBalance Banking or Advantage Savings accounts, are not eligible to receive overdraft or NSF fees. These accounts are automatically set to Decline All Overdraft, so if you attempt to make a purchase without sufficient funds in your account, the transaction will simply be denied.

If you opt into overdraft protection, you’ll have peace of mind knowing that most of your transactions are covered; however, there are many things to consider before opting in.

Overdraft protection is not mandatory. In fact, your bank is required to ask whether or not you want to opt in. When opening an account in person, this usually means that the representative will run through a long list of questions so they can get to know you better as a customer and customize your account to accommodate your needs. The overdraft protection question is usually lumped into this list of questions, so it can be easy to opt in without thinking about whether it actually makes sense for you and your financial situation. Do your research before opting in.

Opted-in accounts typically pay more on bank fees than accounts that aren’t opted in, and the bank could still charge you an NSF fee even if you are opted into overdraft protection. This might happen if you opted into overdraft protection but don’t have enough funds in your linked account to cover the transaction.

Remember: You can opt into or out of overdraft protection at any time.

Learn more about what you should know before opting into overdraft protection.

How to Avoid an Overdraft Fee at Bank of America

Overdraft fees are one of the most common charges detected on Cushion customers’ accounts, but there are small actions that you can take to avoid them:

• Keep an eye on your account balance and charges.
• Sign up for low-balance notifications.
• Carefully consider whether you should opt into overdraft protection.

Learn more about how to avoid an overdraft fee.

How to Get an Overdraft Fee Refund

Sometimes, overdraft fees are inevitable. But we’ve got great news for you! If you get hit with one, that’s not the end of it. You can try to get Bank of America overdraft fees refunded on your own, or sign up for Cushion’s ⚛️ Fee Genius and optional 💭 Fee Negotiation add-on to try to get some of that cash back.

If you choose to go the road alone, here’s how you can increase your chances of success.

Prepare your information
Name, address, bank account number, the fees that you’d like to negotiate, and possibly your social security number.

Introduce yourself
“Hello. My name is [your name], and I recently received an overdraft fee while using my card. I’m contacting you to see if you would be willing to refund this fee.”

Have your points of leverage ready
Have you been financially affected by COVID-19? Are you a loyal customer who has banked with the institution for an extended period of time? Do you have multiple accounts with the bank? Do you make regular deposits? Is this overdraft a rare occurrence?

Be patient, persistent, and prepared not to get a refund every time
A little kindness goes a long way. Remember: The representative that you’re speaking with on the phone likely didn’t write the rules on refunds. But also, don’t hesitate to press the issue if you initially hear “no”—that’s what your points of leverage are for. Sometimes, success depends on the representative that you speak with, so try calling back a few days later to speak with someone new. Finally, you have to be willing to lose some negotiations. Try not to get discouraged, but do try to take the necessary steps to avoid an overdraft fee in the future.

Please note: If you are opted into Cushion’s 💭 Fee Negotiation add-on and contact your bank to negotiate fees while we have an open negotiation, Cushion will still take a commission on any successful negotiations. We cannot track external communication between you and your financial institution, so our system will automatically take credit for any refunds. If you have any questions about which fees are included in your active negotiation, please reference your Cushion dashboard.

Learn more about how to get an overdraft fee refund.

Find Bank of America’s full fee schedule here.