I prefer the way banks do it here: you don't pay an overdraft fee, nor are you denied (unless you have a non-fixed income). Instead, it's treated like credit and you pay a low percentage at the end of the quarter/year depending on how long you stayed negative. I can't remember the numbers exactly but I've paid at most around 20 Euro after having gone -1000 for more than a month.

Most US banks and credit unions offer a similar service, called an "overdraft line of credit." Overall I think it provides the best experience for the customer, but there are a few issues. You have to know about it and apply for it. You need a good enough credit score and/or regular income to qualify. And many of the people who currently lose money to overdraft fees would probably just max out their line of credit (commonly $1,000) and then continue to overdraft while also paying $80/year or whatever in interest.

A hybrid approach is the best way to go, IMO.

Like...allow up to $500 to be overdrafted with interest being charged. If you reach $500 in overdraft, then decline any further charges.

Not spending more than you have is the best way to go.

Sometimes you have much more, just in a different account.

Why not just use a credit card?

If you were going to phrase that the way most (inflammatory) articles talk about short term loans (like payday), you could instead say that you were charged 26% APY.

seems like an awful lot of risk for a bank, unless they can see you have the money in another account you hold with them. Still, you're essentially treating your checking account as a credit card yet they are giving you almost no interest rate instead of the 20% seen on credit cards? Seems fishy

I maybe should have mentioned that we also have direct deposit here for pretty much everything i.e. the bank knows where you're employed and how much income you make per month. I've heard from e.g. students without permanent jobs that they don't usually get this perk (anymore). But yes, it's essentially a credit card with very low interest rates, although I have a credit card as well and the debt is automatically deducted from my bank account at the end of the (CC billing) month. There is also a section in the online banking to view CC transactions even though it's a separate entity from the bank, so any changes to e.g. region locking, limits, etc. must be done via the CC website.

This (the bank knows where you're employed and how much income you make) is only possible with one account per person, right?

In the US people that do direct deposit are also treated differently by the banks. Both on the surface, i.e. you get better interest rates, and under the hood (fraud models adjusted).

With Chase you can choose if you want them to do this or to overdraft and charge you a fee. By default overdraft protect is off, so charges are just rejected.

That's good that it's default to decline. It wasn't always that way. In fact, overdraft protection used to be the mandatory and only option.

The reason that you have an option is actually not because of Chase's goodwill, but due to an Obama-era law that requires banks allow end users to turn off overdraft protection: https://www.cbsnews.com/news/obama-signs-sweeping-financial-...

There are some unfortunate and annoying loopholes. In particular, if you have a recurring, subscription based fee (instead of a typical debit card transaction) they can and still will charge you overdraft fees for that.

That's great news. We can only hope that with awareness and competition that once again becomes the standard!

Pretty much every US bank allows account holders to disable overdraft protection for checks and debit cards. It's just a question of whether that account feature is on or off by default. Most banks used to turn it on by default, perhaps motivated by the overdraft fees. Now industry practice is shifting and more banks are disabling it by default.

I prefer to have overdraft protection turned on. I usually keep very little money in my checking account and transfer any excess to other accounts. But a couple of times I screwed up the timing (my own fault). Paying my bank an overdraft fee was a lot better than bouncing a check.

> I use citibank and they've recently announced that they're going back to the old ways of just declining the charge, and eliminating overdraft fees. Hopefully that's a trend that other banks are also following.

I have to wonder what the incentive is for them to go back to that instead of easy profit

Could be good marketing/competitive advantage.

Regulatory fear.