It’s happened to the best of us. Millions of working Americans frequently find themselves in need of funds between paydays. When faced with financial shortfalls, employees with limited access to traditional credit resort to expensive alternatives, such as pesky overdraft fees. As American employees live a hectic life, it’s understandable to lose track of checking account transactions and fall victim to these fees, costing employees hundreds of dollars a year. For those employees being affected, overdraft and NSF fees can become a big financial issue. It can destroy an employee’s budget and possibly push them out of the banking system completely. The negative effects of this issue also impact employers and the workplace. These negative effects are heavily tied to employee productivity, satisfaction, and retention in the workplace.
Banks with more than $1 billion in assets are now obligated to report on how much revenue they bring in from overdraft fees and other charges. Fees from overdrafts on consumer checking accounts have become a substantial source of revenue for many banks. According to the Consumer Financial Protection Bureau (CFPB), banks made more than 65% of consumer deposit account revenues from overdraft fees.
In hopes of helping consumers, the CFPB provided these tips to help reduce or avoid overdraft and NSF fees:
1. Don’t “opt-in” to debit card-based overdraft: your bank or credit union can’t charge you a fee for an overdraft with your debit card or at an ATM unless you “opt-in” to overdraft coverage for these transactions.
2. Link your checking account to a savings or money market account at your bank or credit union: if you run out of money in your checking account, the bank will pull money from the account you’ve linked it to when needed to cover new transactions. Note that many institutions charge fees for sweeping funds from a linked account but those fees are generally lower than per-item fees for overdrafts or NSFs.
3. Track your balance as carefully as you can, and if your bank or credit union offers them, sign up for low balance alerts to know when you’re at risk of overdrawing your account.
4. Switch to a checking or prepaid account that does not authorize overdrafts. Note that some accounts that do not authorize overdrafts still charge NSF fees for returned checks and electronic (ACH) payment attempts.
But perhaps, a much simpler solution to avoid overdraft fees is FlexWage’s® financial wellness benefit, WageBank®.
WageBank solves the problem by providing instant access to a portion of earned but unpaid wages based on employer policies. This can save employees over $700 annually and keep them focused on their work, not their finances. Americans can now say goodbye to overdraft fees and hello to a new sense of financial freedom. WageBank is not a high-cost loan but a responsible, low-cost, risk-free way to deal with employee cash flow challenges. WageBank has achieved recognition from the Consumer Financial Protection Bureau and Pew Charitable Trust, among others, and is recognized as one of the most powerful financial products for employers since the 401K.
It’s safe to say your employees should have access to the funds they have earned without resorting to predatory lenders or onerous overdraft fees.