TD Bank recently announced enhancements to its overdraft policies and services to help customers avoid potential overdraft fees.
The enhancements, which will be rolled out in multiple phases throughout 2022, will allow customers to overdraw their personal deposit accounts by up to $50 before incurring overdraft fees. TD will notify existing customers about these changes before they go into effect.
Additional enhancements will soon provide customers with 24 hours to cure and avoid an overdraft fee, as well as balance alerts, so customers are informed and can act when their account balances are low, and elimination of the transfer fee for customers using savings overdraft protection services. These enhancements follow the August 2021 launch of TD Essential Banking, a no-overdraft-fee banking account.
"Customer response to Essential Banking encouraged us to go further in providing valuable financial supports and safeguards across our consumer deposit accounts," said Matt Boss, Head of Consumer Products. "These policy changes are the next step in evolving our product offerings. By incorporating customer feedback and insights into our approach, we've been able to design and deploy policy changes, services, and resources that will be meaningful to our customers and help them establish a more secure, inclusive and sustainable financial future."
Overdraft Services: What to Know
We understand that automatic payments or unexpected expenses can cause customers to overdraw their bank accounts. Maybe their paycheck hasn't fully cleared before they make a purchase, or multiple automatic payments are authorized at the same time. If a customer spends more on a purchase, payment, or withdrawal than they have available in their account, this can lead to an overdraft fee.
Banks and other financial institutions typically offer some form of overdraft protection, which is any service that helps customers cover charges that would overdraw an account. When customers opt into an overdraft service, they grant their bank permission to pay transactions even if the costs will reduce a customer's account to a negative balance. This usually results in a fixed overdraft fee. It's important to note that customers must opt in or opt out of overdraft protection services at any time.
For example, TD's Debit Card Advance is an optional overdraft service offered with personal checking accounts that will help customers avoid debit card declines. Enrollment is not automatic – customers must sign up for this service. The advantages of using an overdraft protection service allow deposit customers to pay bills and make purchases without the transactions being declined. Customers can also avoid late fees associated with certain expenses, such as bills or utility payments.
In many cases, processing these charges provides the customer with flexibility and needed liquidity at time of payment. In fact, according to a recent national survey commissioned by the American Bankers Association, 90% of adults find their bank’s overdraft protection to be valuable.
TD is committed to offering products and services that meet different customer needs. For example, TD Essential Banking account holders are not subject to overdraft or insufficient funds fees, but the bank may decline or return transactions that would result in an overdraft. Therefore, many customers choose to enroll in an optional overdraft service, like TD Debit Card Advance, which authorizes TD Bank to process transactions when customers don't have enough money available in their account to cover the costs.
Customer tips for avoiding fees
To resolve an overdraft situation, a customer will have to deposit or transfer money to their bank account to cover the overdraft amount plus any fees the bank charged. Otherwise, the balance owed will be subtracted from the customer's next deposit. By being proactive in managing accounts and charges there are other ways to avoid overdraft charges:
- Use an account that doesn’t charge you: Many banks now offer accounts options that are free of overdraft fees. TD Bank offers TD Essential Banking, a low-cost, no-overdraft-fee deposit account. TD Essential Banking customers are not required to maintain minimum daily balance requirements.
- Track your spending: Proactively monitor daily account activity with your bank's mobile app or online banking platform. Check your balance before making purchases and keep tabs on spending.
- Manage Automatic Payments: Leveraging autopay services is convenient, however understanding when these payments will withdraw is important to ensuring your account has funds to cover these payments. Keep a list of automatic payments, such as your credit card bill or car payment, with the dates these charges will be withdrawn.
- Sign up for bank alerts: Set up an alert to notify you when your account balance falls below a certain amount. These warnings can give you a heads up when it's time to add or transfer funds or resist spending before you overdraw.
- Link to a savings account or credit card: Your bank may offer the option to automatically use another account to cover the charge if you don't have enough funds for a transaction. As mentioned, a fee may also be charged for this service, but it could be less than the overdraft fee.
- Replenish the funds quickly: If your account balance becomes negative, replenish your account quickly. Some banks offer a grace period to bring your account to zero or a positive balance.
The Benefits of Financial Education
In addition to the overdraft enhancements, TD is also expanding financial education-based text messaging for new-to-bank customers with overdrawn accounts. TD is seeing a 15% reduction in overdrafts among these customers.
"When we provide real time financial information and resources, we are seeing customers adopt better financial habits, which should help to reduce the likelihood of overdraft activity in the future," Boss concluded. "The results validate our approach to implementing meaningful enhancements in our overdraft policies and services that are based on data, insights, and direct feedback from our customers."