These 3 Banks Don't Charge Overdraft Fees -- Period

Overdraft fees can come in several different flavors, none of which are particularly appetizing. An overdraft is essentially what allows you to take your bank account balance below $0. If you've opted into overdraft protection, it can be all too easy to accidentally make transactions that would take you into the red. Particularly if, like many Americans, you don't have a lot of leeway financially.

The trouble is that overdraft fees can quickly add up. Research by the Consumer Financial Protection Bureau (CFPB) shows many top banks charge between $10 to $35 a pop. Some charge for three to five overdrawn transactions in a day. If you don't realize you're overdrawn, you could quickly rack up over $100 in fees. Customers would be forgiven for feeling their banks are kicking them when they're down.

The good news is there have been big changes in overdraft protection policies in recent years. Even better? Some banks have really got their customers' backs when it comes to overdraft fees.

These three banks don't charge overdraft fees at all

Pressure from consumer groups like the CFPB means a lot of top banks have stepped away from some of the most extreme overdraft fees. For example, you used to get charged a non-sufficient fund (NSF) fee when a bank declined a payment that would have sent you overdrawn. Almost all the big banks have now done away with NSF fees altogether.

Now banks have a hodgepodge of different fees and policies, with a mix of grace periods and cushions that let your balance slip slightly under $0 without facing a fee. The following three banks have overdraft policies that really stand out.

1. Ally Bank

Ally Bank is committed to low- or no-fee banking, so it isn't too surprising that it goes above and beyond in the overdraft department. If you make a transaction and there's not enough money in your account to cover it, Ally will either pay it or decline it. It won't charge you a fee either way.

When it comes to overdraft protection, Ally offers:

• CoverDraft Service: This safety net allows you to go $100 into the negative ($250 if you qualify). You'd then have 14 days to cover the shortfall. Most customers will qualify for this service 30 days after they've deposited $100 or more.
• Overdraft Transfer: If you link your Ally savings account or money market account, the bank will automatically move money to cover your overdraft. It does not charge a fee for this service.

Ally doesn't charge monthly fees and will reimburse up to $10 a month in out-of-network ATM fees. Some customers may also be able to access their paychecks two days early with its early direct deposit feature. This can be useful if you're stretched thin before pay day.

2. Capital One

Capital One is also committed to low- or no-fee banking. It eliminated overdraft fees at the end of 2021. It offers the following:

• No-fee overdraft protection: Qualifying Capital One 360 Checking customers can opt in to this protection. Capital One will pay certain transactions (such as automatic bill payments, recurring direct debits, and checks). You can also ask the bank to authorize other payments such as ATM transactions. It won't charge you, but asks you to deposit funds "promptly."
• Free savings transfer: Capital One won't charge for automatically transferring money from a linked savings account. There are some caveats -- for example, you can only make use of the service six times a month.

If you don't opt in to these services, the bank will decline transactions that would send your balance below $0. It won't charge you a fee.

3. Citibank

Citibank did away with overdraft fees last year. It won't charge fees for going below $0 on its low-fee Access Checking account or its Regular Checking account. The bank won't authorize ATM or debit card transactions if you don't have the funds to cover them.

It also offers certain overdraft protection services, including:

• Safety Check transfer: Automatically transfers funds from a linked savings account to cover any shortfall. Some banks charge a fee for this type of overdraft protection, but it is free with Citibank.
• Checking Plus® line of credit: A line of credit is a type of loan that lets you draw money and repay it up to a certain limit. If you're approved, you could use this to cover transactions that would otherwise be declined. You'll pay interest on what you borrow -- at the time of writing, the line of credit came with a 20.50% variable APR.

Be aware that Citibank does charge a waivable monthly fee for its checking accounts. There are a few ways to avoid the fee, including making $250 in qualifying deposits each month. If you're trying to avoid paying fees, make sure you understand the requirements.

How to avoid paying overdraft fees

There are ways to avoid a lot of common bank account fees, including overdraft charges, that can save you money. If you're not keen on switching banks, here are some other ways to make sure your bank doesn't hit you with charges at the worst possible time:

• Set up a low balance alert: See if your bank will let you set up an automated message whenever your account is running low. This can help to avoid accidentally taking your account into negative territory. Be ready to top up your account if you're close to $0.
• Monitor your bank balance: The great thing about internet banking and bank apps is that you don't need to wait for your statement to see what state your finances are in. Try to keep track of any automatic payments. Where possible, schedule them for a few days after you're due to get paid.
• Understand your bank's overdraft policies: Find out what your bank will do if you overdraw your account and whether it has a cushion or grace period before charges apply. If you want your bank to cover things like ATM transactions and debit card payments that would send you overdrawn, you'll need to opt in. If you don't, the bank can't charge you for this service.
• Consider linking an account: Your bank may charge you if it makes a transfer from a linked savings account. All the same, the charge may be lower than the overdraft charge.
• Build an emergency fund: It's all very well to talk about paying attention to your balance so you can act if it gets low. But if you don't have the money, it won't help so much. Try to build some savings that you can use to tide you over if your checking account balance is close to $0.

It is always frustrating to have to pay bank fees, but even more so when you're counting every cent. If you regularly find your account skirts close to $0, it may be worth looking at the banks mentioned above.