This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How I Got Hit With an Overdraft Fee After Opting Out of Overdraft Protection

Stocks in this article: WFC JMP BAC

NEW YORK ( MainStreet) -- Here's a lesson I learned the hard way: You can still be hit with an overdraft fee even after you've opted out of overdraft protection if you've linked recurring debit card charges, such as a monthly bill or a magazine subscription, to your checking account.

I learned of this policy recently when Wells Fargo (WFC) hit me with a $35 fee after covering my $11 gym membership to Planet Fitness, which was linked to a debit card account I am in the process of closing (hence, the lack of funds).

A monthly gym membership fee linked to a debit card is exactly the kind of recurring charge that could get you an overdraft fee even after you've opted out of overdraft protection.

This practice is, unfortunately, perfectly legal. Legislation introduced back in 2010 that requires financial institutions to make you opt in to overdraft protection pertains only to ATM and one-time debit card transactions covered by the bank when there are insufficient funds in your account. It doesn't apply to recurring debit card charges or what would have otherwise been a bounced check.

Major banks all handle this caveat differently. Wells Fargo and Chase (JPM) make it clear on their Web site that they may process recurring debit card charges and checks when funds are low, even if a customer doesn't have overdraft protection.

The policy at Bank of America (BAC), which eliminated overdraft at the point of sale in 2010, is a bit more complicated because customers can elect to have different overdraft settings on their account. Those who select its "Decline All" setting will have their recurring debit card charges declined, without being charged a returned item fee. Online banking bill pay or other electronic transactions tied to that checking account, however, will typically be declined at the expense of a $35 returned item fee. In any case, it's a good idea to check with your bank to understand exactly when an overdraft fee will be imposed.

It will be interesting to see if the Consumer Financial Protection Bureau introduces legislation that allows consumers to opt out of overdraft protection entirely when it completes its inquiry into overdraft fees later this year.

I know I certainly would have preferred it if my bank declined the transaction and left me to deal with Planet Fitness on my own, though I suppose other customers may prefer to have checks for certain monthly bills, such as mortgage payments or utilities, be covered by their bank when funds are low. The point is, it would be nice to have the choice.

In the meantime, the caveat further supports the notion that certain automatic monthly payments, particularly cellphone bills and gym memberships, should be linked to a credit card, where a cardholder can not only avoid high overdraft fees, but earn rewards on the purchases.

>To submit a news tip, email:

Follow TheStreet on Twitter and become a fan on Facebook.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,870.53 +65.73 0.37%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs