Introduction
Overdrafting is a common occurrence among bank customers who do not keep a close eye on their account balances. At Wells Fargo, overdrafting occurs when you spend more than what is available in your account balance and the bank covers the difference. However, this service is not free and comes with fees that you will have to pay later. In this article, we will go over Wells Fargo’s overdraft policies, how much money you can overdraft, the cost of overdrafting, potential consequences, and best practices for overdrafting with Wells Fargo.
How Much You Can Overdraft
Wells Fargo offers two types of overdraft services – standard overdraft practices and overdraft protection. Standard overdraft practices allow Wells Fargo to cover your overdrafts at its discretion and charge you an overdraft fee of $35 per item. You can overdraft up to $500 on most accounts including the Everyday Checking account but there can be differences depending on the type of account you have.
Overdraft protection, on the other hand, allows you to link your Wells Fargo checking account to a savings account or credit card to prevent overdrafts when you don’t have enough funds. The bank will transfer funds from the linked account to cover the overdraft and you will be charged a $12.50 transfer fee per day. There is no limit to the amount of overdraft protection transfers but keep in mind that transferring money from a savings account might trigger the federal Regulation D which limits the number of transfers you can make per month.
The Cost of Overdrafting
Wells Fargo charges a $35 overdraft fee for each transaction that exceeds your available account balance unless you have opted into overdraft protection. The bank also charges a daily fee for overdrafts that remain unpaid for five or more consecutive business days. The extended overdraft fee varies by state but it ranges from $0 to $10 per day and can add up to $1000 for accounts that remain overdrawn for an extended period.
It is essential to note that the overdraft fee accrues on a daily basis. So, if you have an overdraft of $50 and it remains unpaid for five days, you will have to pay $35 overdraft fee plus $5 daily fee for each of the five days totaling $60 in overdraft fees.
Potential Consequences of Overdrafting
If you frequently overdraft your account, it can result in significant financial consequences. Multiple overdrafts can accrue extended overdraft fees, making it even more challenging to get out of debt. Additionally, overdrafting can negatively impact your credit score, especially if you have unpaid overdraft balances that are sent to a collection agency. Wells Fargo may also close your account if you repeatedly overdraw your account without correcting the issue.
Best Practices for Overdrafting with Wells Fargo
The best way to avoid overdrafting with Wells Fargo is to keep track of your account balance and to avoid spending beyond your means. Here are a few tips to help you manage your overdrafts:
- Sign up for alerts – Wells Fargo allows you to set up account alerts that will notify you via text, email, or phone when your account balance falls below a certain amount. This way, you can monitor your account balance and avoid overdrafting.
- Avoid spending beyond your means – At times, it’s tempting to spend more than you can afford, but this is a sure way of overdrafting your account. Stick to a budget, and only spend what you have available in your account.
- Opt-in to overdraft protection – If you frequently overdraft your account, you may want to consider opting in to overdraft protection. By linking your checking account to a savings account or credit card, you can avoid overdraft fees and extended overdraft fees.
- Review your account activity regularly – Check your account activity regularly to ensure that you are aware of all charges and transactions made from your account.
Conclusion
Overdrafting your Wells Fargo account can be costly and have significant financial consequences if not managed properly. The bank offers two types of overdraft services – standard overdraft practices and overdraft protection – with different fees and limits. By monitoring your account balance, sticking to a budget, and reviewing your account activity regularly, you can avoid overdrafting your account. However, if you do overdraft your account, it’s essential to pay the fees on time to avoid any extended overdraft fees or negative impacts on your credit score.
