Overcome overdrafts — simple strategies to take control
March 16, 2023
4 min read
What we'll cover
How to avoid overdraft fees
What CoverDraft is and how it works
Benefits of automation
We can all relate to the modern struggle of striving to keep all the balls in the air. You’re putting in extra hours at work, taking care of your family and hopefully squeezing in some fun. Amid the hectic pace, sometimes accidents happen — including overdrafts on your checking account. Overdraft fees can add up quickly, costing American consumers upwards of $8 billion every year!
At Ally, we want to help you take charge of your finances to ensure accidental overdrafts don’t become a recurring problem.
Avoid overdrafts with a savings account
One easy way to avoid overdrafts is to link your savings and checking accounts with our Overdraft Transfer Service, which moves money from your linked Ally Bank Online Savings Account in increments of $100 if you have an overdraft. This no-cost service is an easy way to eliminate the worry of accidental overspending.
Keep in mind, if you link a savings account for Overdraft Transfer Service, those transfers may count toward transfer or withdrawal limits on your savings account.
Choose a bank with no overdraft fees
Overdraft fees vary from bank to bank. According to Bankrate.com, the average charge is $29.80 per occurrence. You can see how these fees can add up quickly, especially if you get hit with them for multiple transactions. Choosing a bank that doesn’t charge overdraft fees is one way to protect yourself from unnecessary cost and hassle.
At Ally, we recognize the stress, confusion and inconvenience caused by overdraft fees. That’s why in June 2021, we got rid of them. No strings attached.
What began as a temporary measure as part of a larger relief program to lessen the pressure of the pandemic became permanent. When we saw the strong positive impact on our customers, we decided to “do it right” and extend this powerful benefit indefinitely.
First, we eliminated overdraft fees. Then we took it one step further with the introduction of CoverDraft, a feature of the Ally Bank Interest Checking Account that acts as a free, temporary line of defense of up to $250 against a checking overdraft. If you overspend, you’ll have 14 days to bring your balance back to $0 or more.
In most cases, you’ll qualify for $100 in CoverDraft protection 30 days after depositing a total of $100 into your Ally Bank Interest Checking account. To raise the coverage amount to $250, set up direct deposit and receive a qualifying direct deposit of at least $250 into your account for 2 months in a row.
CoverDraft acts as a safety net. Keep in mind, it’s not a line of credit or a guarantee. If your purchase isn’t covered for any reason (let’s say the transaction exceeds your CoverDraft limit, for example), it will be declined – but we’ll never charge you an overdraft fee.
CoverDraft covers a number of everyday expenses, including debit card purchases and automatic payments (like monthly subscription fees), as well as transfers you initiate at other institutions and checks or transfers you initiate before overdrawing your account. You’ll get an alert when you’ve overspent, and CoverDraft works 24/7, so you can rest assured you won’t be caught without a safety net (up to $250) no matter where or when you spend.
Combine CoverDraft with Overdraft Transfer Service
The best part about CoverDraft is that it works in tandem with our overdraft transfer service. Think of the two features as a tag team defending you against accidental overdrafts. With Overdraft Transfer Service, your linked Ally Bank Online Savings Account or Money Market Account will act as your first line of defense, and then CoverDraft kicks in as an added protection. You can use Overdraft Transfer Service, CoverDraft or both.
Automate and monitor
To steer clear of a slip-up, monitor your account regularly to stay on top of your balance. While direct deposit and automatic bill payment can be incredibly convenient, it’s important to check in and keep track of when your deposits clear to make sure you don’t overspend before your next paycheck.
With Ally Mobile Banking, it’s easy to check your balance, make transfers, and set up debit card controls and alerts while you’re on the go. Get into the habit of checking your account on a regular basis. If you’re not in the habit of checking consistently, start by logging in once or twice a week with a goal to ramp up to checking in daily. You can see which transactions have posted, keep up with your balance and more quickly spot any suspicious activity.
Don’t let overdraft fees ruin your financial progress
Occasional mishaps are a fact of life. But overdraft fees don’t have to derail your financial plans. We’re all better off with an ally and that’s why we have your back.