I got a call Wednesday from my bank. I was at work.
“Blah blah blah we can now offer you free overdraft protection! No annual fee!”
I was busy, plus I’ve wanted overdraft protection for a couple of years. One overdraft cost me about $30 two years ago.
“Sure, sure. Sign me up. Send me the info so I can review it, but ok.”
I had several payments set to charge on Friday. I get paid on Friday as well. I’ve done this many times before - the payments always clear late on Friday while my paycheck always clears late Thursday night.
This time - miracle of miracles - the payments all cleared late Thursday. It’s now 12:27 AM CST and my paycheck hasn’t cleared.
So my new “overdraft protection” charged me $2 to clear everything. Hmmm.
Is this a trap? I’ve gone about three years now doing exactly what I did this week - set payments (auto loan, credit card) to clear on a Friday payday. These payments always cleared late afternoon Friday. My paycheck has always cleared Thursday night before. But this time the payments popped at 12:01 Friday the 21, while my paycheck has not even registered.
Well, with my bank it’s just another account with really low interest and they charge me IIRC a buck or maybe a buck fifty to automatically transfer money into my checking account to cover stuff. It’s got a two thousand dollar limit. No hidden anythings, and it certainly doesn’t affect when things clear. I use a credit union, though, and they’re usually pretty above-board.
Also a credit union member x2, and my credit unions take money from savings (assuming I have any there) and transfer it to checking (for free, I believe) if I overdraw myself. Your situation sounds to me like something happened at the company that’s supposed to direct deposit your check, rather than with your bank.
While it does seem a little fishy, I also think it’s a bad idea to set up paymets to clear the same day as your paycheck. If anything goes wrong with the deposit of your check, you’ve got no way to stop those payments before you realize something went wrong.
It sounds like the overdraft protection is “free” in that - as they proudly trumpet - there’s no cost in keeping it active and available (“no annual fee”). However, the $2 per use fee is probably buried in the fine print and they don’t want to bring it up, preferring to focus on the “no annual fee!” part.
It’s like free overdraft insurance with a $2 deductible.
Sneaky? Yeah, kinda. But on the whole you still come out ahead, I think. $2 versus $30 when your balance dips negative, and $0 if it never does. So…scam? I don’t think so, even though the marketing spiel is, IMO, deliberately misleading in its very narrow use of the word free.
With my bank it’s more like $10, though - $2 seems pleasantly low to me.