When it comes to banking, one of the most profitable sources of income for banks is from overdraft fees. Overdraft fees are charged when a customer’s account balance is insufficient to cover a transaction, resulting in the bank covering the difference and charging the customer a fee. While overdraft fees can be a helpful service for customers who need a little extra help in a pinch, they can also be a major source of income for banks.
In recent years, banks have been increasingly relying on overdraft fees as a source of income. According to the Consumer Financial Protection Bureau, banks collected $11.45 billion in overdraft fees in 2017, up from $11.14 billion in 2016. This means that banks are making more money from overdraft fees than ever before.
Fortunately, there are steps you can take to protect yourself from overdraft fees. The first step is to make sure you keep track of your account balance. This can be done by regularly checking your account online or by using a mobile banking app. Additionally, you should set up alerts on your account so that you are notified when your balance is getting low.
Another way to protect yourself from overdraft fees is to opt-in to overdraft protection. This service allows you to link your checking account to a savings account or line of credit, so that if you overdraw your checking account, the bank will transfer money from the linked account to cover the difference. This can help you avoid overdraft fees, but it is important to note that you may still be charged a fee for the transfer.
Finally, you can also protect yourself from overdraft fees by setting up automatic transfers from your checking account to a savings account. This will help ensure that you always have enough money in your checking account to cover any transactions.
Overall, overdraft fees can be a major source of income for banks, but there are steps you can take to protect yourself. By keeping track of your account balance, opting-in to overdraft protection, and setting up automatic transfers, you can help ensure that you don’t get hit with unnecessary overdraft fees.