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Best Checking Accounts for Minimizing Overdraft Fees

| MoneyRates.com Senior Financial Analyst, CFA
min read
Is overdrafting your checking account a bad habit you can't break? Then at least you can limit the damage by choosing an account that keeps the cost of overdrafts relatively low.

frustrated-young-woman-checkingOverdraft fees can turn even a small purchase into a big expense.

That's because banks often charge an overdraft fee for each transaction that occurs while your account is overdrawn.

Losing track of your balance just once can result in multiple charges to your account.

Fortunately, there are checking accounts that can help you minimize overdraft charges - but they're not universal.

Methodology: How We Find Checking Accounts that Minimize Overdraft Fees

Overdraft fees can be most damaging when they come in bunches - that is, when banks charge multiple overdraft fees because a customer had more than one transaction on a day when the account was overdrawn.

So MoneyRates surveyed 90 banks and 348 different checking accounts to find the ones that offer:

  • low overdraft fees
  • caps on the number of fees charged per occurrence

Beyond that, we also considered monthly fees, including fees that some banks charge for paper statements in order to help rank the accounts. After all, the more fees a bank charges, the more likely the account balance is to become overdrawn.

What is the Average Overdraft Fee Now?

According to The Latest MoneyRates Update on Bank Fees, the average overdraft charge remained unchanged during the last six months. And even though that is good news, it's quite a relief to eliminate these charges altogether.

If overdrafting your checking account happens more frequently than you'd like, you could really improve your finances by switching to one of the checking accounts highlighted below.

Overdraft fees by bank

NOTE: All of the account details listed below applied at the time of the most recent MoneyRates.com semi-annual Checking Account Fee Survey.

Please be aware that account terms offered by banks may depend on location and are subject to change at any time, so check the details before signing up for any account.

1. Discover Bank

OVERDRAFT FEE: $0

OVERDRAFT FEE CAP: $0

NAME OF ACCOUNT: Cashback Checking

ACCOUNT FEATURES: Besides having no overdraft fees, this account also has no monthly service fee or minimum-balance requirement. It also pays you $0.10 per transaction in cash back on up to 100 transactions per month.

BANK DETAILS: Based in Greenwood, DE, Discover Bank offers online banking accounts. It was formed in 1911, and has over $75 billion in deposits.


2. Axos Bank

OVERDRAFT FEE: $0

OVERDRAFT FEE CAP: $0

NAME OF ACCOUNT: Essential Checking

ACCOUNT FEATURES: No overdraft fees, no minimum-balance requirement and no monthly service fees, though there is a $5 per month fee if you want paper statements. You can also link to another Axos account or a line of credit to cover overdrafts.

BANK DETAILS: Axos Bank offers online banking and is based in San Diego, CA. It was founded in 2000 and has over $10 billion in deposits.


3. Ally Bank

OVERDRAFT FEE: $25

OVERDRAFT FEE CAP: $25

NAME OF ACCOUNT: Interest Checking

ACCOUNT FEATURES: There is no minimum-balance requirement nor monthly service fee, and the overdraft fee of $25 is well below the industry average of $32.30.

Also, by capping overdraft fees at one per day, this account could significantly reduce your overdraft charges if you have more than one transaction while the account is overdrawn.

Finally, this account pays interest on your balance.

BANK DETAILS: Ally is an online bank founded in 2004 and based in Sandy, UT. It currently has over $120 billion in deposits.


4. USAA Bank

OVERDRAFT FEE: $25

OVERDRAFT FEE CAP: $50

NAME OF ACCOUNT: Cashback Rewards Checking

ACCOUNT FEATURES: Along with a lower-than-average $25 overdraft fee, a cap of two such fees per day could help limit your overdraft charges.

This account has no monthly service fee and a very modest $25 minimum-opening-deposit requirement. Cashback rewards pay you $0.10 per debit card transaction.

BANK DETAILS: Accounts at this bank are reserved for USAA members, who must be U.S. military or their eligible family members. USAA Federal Savings Bank is based in San Antonio, TX and was founded in 1983. It currently has over $77 billion in deposits.


5. TIAA Bank

OVERDRAFT FEE: $30

OVERDRAFT FEE CAP: $60

NAME OF ACCOUNT: Yield Pledge Checking

ACCOUNT FEATURES: With no monthly fee and a $100 initial deposit requirement, this account should be accessible to most consumers.

The overdraft fee of $30 is less than the industry average, and this account provides additional protection by capping overdraft fees at two per day. This account also pays interest on your balance.

BANK DETAILS: TIAA Bank is based in Jacksonville, FL and was founded in 1998. It currently has over $28 billion in deposits.


6. State Farm Bank

OVERDRAFT FEE: $25

OVERDRAFT FEE CAP: $75

NAME OF ACCOUNT: Checking Account

ACCOUNT FEATURES: This account combines a relatively low overdraft fee of $25 with a cap of three such fees per day. It has no minimum to open and no monthly maintenance fee, though there is a fee of $5 per month if you want paper statements.

BANK DETAILS: This is an online bank based in Bloomington, IL. It was founded in 1999 and has over $11 billion in deposits.


7. Chase Bank

OVERDRAFT FEE: $34

OVERDRAFT FEE CAP: $102

NAME OF ACCOUNT: Total Checking

ACCOUNT FEATURES: While the overdraft fee is slightly higher than the industry average, the cap of three such fees per day somewhat mitigates that. There is no initial deposit requirement, but you must maintain a balance of $1,500 to avoid a $12 per month service fee.

BANK DETAILS: Chase Bank was founded in 1824 and is based in Columbus, OH. It has over 5,000 branches across 39 states and over $1.6 trillion in deposits.


8. Wells Fargo Bank

OVERDRAFT FEE: $35

OVERDRAFT FEE CAP: $105

NAME OF ACCOUNT: Opportunity Checking

ACCOUNT FEATURES: While the overdraft fee is higher than most, the cap of three such fees per day could help limit the damage. This account requires a $25 opening deposit, but you must maintain a balance of $1,500 to avoid a $10 monthly service fee.

BANK DETAILS: Located in Sioux Falls, SD, Wells Fargo Bank was founded in 1870. It has over 5,400 branches across 40 states and nearly $1.4 trillion in deposits.


9. HSBC Bank

OVERDRAFT FEE: $35

OVERDRAFT FEE CAP: $105

NAME OF ACCOUNT: Choice Checking

ACCOUNT FEATURES: This account is available both online or through HSBC's branch network. The $35 overdraft fee is higher than average, but is capped at three occurrences per day.

There is no minimum to open, but you must maintain a $1,500 balance in this or related HSBC accounts to avoid a $15 monthly maintenance fee.

BANK DETAILS: The current version of HSBC Bank was founded in 2004, though that is a successor to a much older global institution. It is headquartered in Tysons, VA and services over $133 billion in deposits through over 200 branches across 10 states.


10. American Savings Bank

OVERDRAFT FEE: $30

OVERDRAFT FEE CAP: $120

NAME OF ACCOUNT: Kalo Essentials Checking

ACCOUNT FEATURES: This account is available through American Savings Bank's branch network in Hawaii. The overdraft fee is cheaper than the industry average and is capped at four occurrences per day. This account requires just $20 to open and has no monthly service fee though there is a charge of $5 per month if you want paper statements.

BANK DETAILS: American Savings Bank was founded in 1987 and is based in Honolulu, HI. Its 50 branches are all in Hawaii, and it has over $6 billion in deposits.


See checking account offers

Steps to Take to Minimize Overdraft Charges

Reducing overdraft fees is a matter of both which account you choose and how you use it. Here are some tips that can help:

  1. Look at both overdraft fees and daily fee caps

    Take a cue from the methodology of this study. It's important to look at both size of the overdraft fee and the maximum number of those fees you could be charged on one day. Banks with no overdraft fees are very rare, but they are a great place to start your search.

  2. Choose an account that matches up well with how you'll use it

    Some accounts waive various charges if you maintain a certain account balance. Others allow free balance transfers from savings accounts at the same bank to cover overdrafts.

    How often you overdraft your account could also affect which account is best for you.

  3. Know the timing of automatic transactions

    If you have direct deposit and/or automatic bill pay set up, your account balance may change without your being aware of it. This could cause you to inadvertently overdraft your account.

    If available, sign up for text notifications of any transactions in your account. At the very least, be aware of the timing of those automatic transactions so you can anticipate when your balance will change.

  4. Use online tools for the most up-to-date information

    Being able to view your account online is a big improvement over relying on monthly statements to check your account balance. If you can, check your balance regularly to avoid accidental overdrafts.

  5. Understand how to balance your checking account

    Balancing your checking account means comparing your records against the bank's records to see if there are any differences. This is a vital skill because you may have initiated transactions the bank is not yet aware of, and vice versa. Balance your checking account at least monthly to maintain an accurate picture of your balance.

Between overdraft fees, monthly service charges and ATM fees, having a checking account can become very costly. Take the time to choose a checking account with reasonable terms that fit the way you'll use the account. This can save you hundreds of dollars a year.

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