What You Should Know About Overdrafts

As a checking account customer you know how important it is to keep track of your balances to avoid the inconvenience and expense of overdrafts and the fees we charge you for them. Learn how to do so with our helpful information on how overdrafts work and how to avoid them.

There has been a lot of attention on overdrafts recently – and overdraft fees - especially fees caused by ATM or debit card overdrafts. Beginning this summer, you will have the ability to choose how you would like Charter One to handle overdrafts created by your ATM and everyday debit card transactions. You can authorize us to allow and pay overdrafts that may happen when you use your ATM or debit card. (Allowing overdrafts is at our discretion, and we cannot guarantee that ATM or debit card transactions that overdraw your account will always be approved.) Or, if you do not want to be able to overdraw your account at the ATM or while making a purchase, you can choose not to opt in. See our Guide to Standard Overdraft Practices for more detailed information. If you want your account to continue to work as it does today without any interruption in service you will need to make a decision to opt in before August 15th.

Upcoming changes do not impact our Overdraft Protection Line of Credit or Savings Overdraft plan; they will continue to work as they do today.

As you consider whether to opt in, here is helpful information about overdrafts, and how to avoid them.

What is an overdraft?

An overdraft occurs – and an overdraft fee is charged to you – when a debit transaction (for example, a check drawn, ATM withdrawal or debit card purchase) exceeds the "available balance" in your account and Charter One still approves the transaction.

What is an available balance?

The available balance is the amount of money in your account, minus any holds (such as, outstanding debit card authorizations (described below)) and uncollected funds as a result of our funds availability policy. It does not reflect checks you’ve written that have not yet cleared, pending online banking Bill Pay transactions, or pre-scheduled debits (such as, health club dues automatically debited from your account at a certain time each month).

How can I determine my available balance?

You can get your available balance any time at the ATM, by phone or online. But only you know how your available balance may be altered by checks you’ve written or online banking bill payments that haven’t cleared yet.

Does my available balance fluctuate during the day?

Yes, it can. Your available balance is updated to reflect transactions you make during the day (such as, cash deposits, direct deposits, account transfers, withdrawals, and debit card purchases).

Can I overdraw my account at the ATM or with my debit card?

Yes, currently, financial institutions, at their discretion, may approve ATM or debit card transactions that result in an overdraft and the charge of an overdraft fee. Effective this summer, you will be able to choose how these transactions are handled. See Changes to Standard Overdraft Practices Coming Soon

What is an "outstanding debit card authorization"?

An “outstanding debit card authorization” is the amount deducted from your available balance while we await the final settlement request from the merchant. Keep in mind, this outstanding authorization amount may be larger, or smaller, than your actual purchase amount. So while we wait for the merchant’s final settlement, a period that can last several days, your available balance is reduced by the amount of the authorization, not your actual purchase amount. In some cases when final settlement is delayed, the outstanding authorization is released, which causes your available balance to appear larger than you might otherwise expect.

What is a merchant’s “final settlement request”?

It is an instruction from the merchant to the bank to deduct the exact amount of your final purchase. It follows after the debit card authorization request and completes the transaction.

When I make a purchase with a merchant, is that money taken out of my account immediately?

Yes, outstanding debit card authorizations for all debit card purchases are immediately removed from your available balance. The timing of when these transactions are actually processed depends on when the merchant sends their request for final settlement. While the majority of transactions are settled within one business day, the actual timing rests with the merchant and is out of Charter One’s control.

How and when are transactions deducted from my account?

At Charter One, we do not process your transactions in the order that you make them or when we receive them. Rather, we post transactions from high-to-low, meaning that at the close of each day, we deduct your highest-dollar transactions first, before deducting your smaller dollar transactions. With this “posting order”, you are at a lower risk of having an important item returned, such as a mortgage, rent or car loan payment. However, these larger items will cause your account balance to be used up faster, and, if it falls to zero, you will incur overdrafts or returned items and related fees. As a result, overdraft fees may be incurred more frequently than if we had deducted the transactions in a different order. Remember though, if the available balance in your account does not fall below zero this “posting order” does not matter.

Can an outstanding debit card authorization result in overdraft fees for me?

A merchant’s outstanding debit card authorization request will alter the available balance in your account. If, as a consequence, your available balance falls below zero at day’s end, then overdraft fees will be charged.

For example, a debit card authorization may lead to overdraft fees in certain circumstances:

• Customers who reuse the funds in their account, anticipating the delay between purchase and settlement, may experience an overdraft fee because the outstanding debit card authorization reduces the available balance in the account.
  
  Example: Bill has a $100 available balance and makes a $75 debit card purchase. Bill assumes that he will still have the full balance available because the debit card purchase may take a day to appear on his account. In fact, his available balance will be immediately reduced by $75, the amount of the outstanding debit card authorization. If he makes another purchase or withdrawal beyond the remaining available balance, it will result in an overdraft fee.
  
  
• If a merchant obtains an authorization for your debit card, but then your purchase is paid for by other means, the merchant must submit a reversing transaction to remove the debit card authorization. If they do not do this, the available balance will be reduced until the hold expires, normally two business days.
  
  Example: Jane has $250 in her account and uses her debit card to pay $175 for theater tickets. She decides, after the card is swiped, to pay by cash but the theater operator does not reverse her debit card authorization. Because they did not reverse the transaction Jane’s available balance is reduced by $175. That night, a $200 check that she had previously written posts to her account. As a result the account is overdrawn and a fee is charged.
  
  
• Some merchants request an authorization for $1 just to ensure that the card is valid, but then submit the full amount of the purchase for settlement, which may overdraw your account.
  
  Example: Chris, who has $40 available in his account, stops at a gas station to fill up. When he swipes his debit card at the pump, the gas station sends a $1 authorization request to the bank. Chris pumps $75 dollars worth of gas into his SUV. When the debit card purchase settles, it overdraws his account and he is charged an overdraft fee.

Overdraft fees may be charged in these instances. But if the mistake is ever on our part, we will gladly refund your fees.

What happens when I swipe my debit card at a gas station?

When you use your card to purchase gas, the station will send a request for a debit card authorization. Keep in mind, this outstanding authorization amount may be larger, or smaller, than your actual purchase. This request is released within two hours of your transaction.

What happens when I swipe my debit card at a hotel or rental car agency upon checking in?

At check in, the merchant will send a debit card authorization request that may exceed the amount that you will eventually be billed. This authorization request reduces your available balance for no more than the business day that it was sent (i.e., if sent on Thursday, it will reduce your available balance until Thursday night; if sent on Saturday, it will reduce the available balance until Monday night).

Can I cover an overdraft and avoid fees?

If you overdraw your account during the day you can cover it and avoid overdraft fees by making a sufficient deposit that same day, or if the funds from a sufficient deposit made earlier become available. You will need to review our funds availability policy to determine which types of deposits are available the same day (such as cash deposits).

What happens if I do not bring my account back to positive status?

If your account remains overdrawn, several things will happen: You will be charged a “Sustained Overdraft fee”, which begins after the account has been overdrawn for three business days. (We encourage you to sign up for online banking alerts to know when your account is overdrawn.) Your account will also be forwarded to our collections department who will contact you to ensure that you are aware of the overdraft, and to discuss ways to bring the account positive. We may also transfer funds from your other accounts to cover the overdraft. Finally, if the account has not been brought back to positive within 60 calendar days, the account will be closed and you may be reported to ChexSystems, a national clearinghouse of check writing information. This may impair your ability to open a checking account elsewhere.

What are Sustained Overdraft fees?

A Sustained Overdraft fee is charged if the account’s overdrawn balance is not brought back to at least a zero balance within three business days. A daily sustained overdraft fee of $6.99 will be charged if your account remains overdrawn for 3 through 12 consecutive business days. The sustained overdraft fee will be assessed on the 4th business day and each day thereafter up to and including the 13th business day.

How can I manage my account so I avoid these fees?

The simplest way to avoid overdrafts is to maintain an accurate and up-to-date check register. Be sure to record fees and regular account charges, such as a monthly maintenance fee. When transactions are recorded, don’t assume that they will not post to your account for several days; many merchants convert checks into electronic debits and charge your account immediately. See Avoiding Overdraft Fees for more information on how to protect your account from overdrafts.

Charter One also offers several free tools to help you manage your account, including free online banking, with free alerts to warn you when your account balance dips below a certain level. You may also sign up for free email or text notification of an overdraft on your account. See Online Banking Alerts for more information on how to stay on top of your account balances.

We’re here to help.

If you have any questions on our services and solutions to help you monitor your money more closely and save on fees, visit a Charter One Banker today.

Thanks for banking with Charter One.