It’s often the first financial product that a young person will use. Maybe they start with a savings account but eventually they graduate and pair their savings account with a checking account. In that process of setting up this new account, the customer will be asked (or they should be) whether they would like “overdraft protection.” The term sounds innocuous and better yet lures them in after all who doesn’t want to be protected. Have your students watch one or more of these videos (hat tip to NGPF’s Jessica for curating these videos from December 2016) and odds are they will choose to “just say no” when it comes to overdraft protection.

This Pew Charitable Trust video from December 2015 interviews people “on the street” to get their thoughts on overdraft fees and policies. Also highlights the blind spots that consumers have when it comes to the “fine print” of checking account agreements. A great overview and only 3 minutes long! Pair this video with the NGPF Fine Print: Reading the Fine Print of Your Checking Account and you will have savvy students when it comes to checking fees!

Key questions for your students:

• Have you ever overdrafted? If so, what were the reasons this happened? What did you learn from it?
• Were there any terms discussed in the video that surprised you?
• Do you think overdraft protection is a good idea?

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From Consumer Reports comes a 2-minute video highlighting the fact that banks are earning $31 billion in overdraft fees and provides advice on how to minimize these fees:

Key questions for your students:

• If you say no to overdraft protection, what happens if you use your debit card and try and take out more money than what is in your account?
• What are other ways that you can manage your account to avoid fees?

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A snappy 1:20 video (which is unfortunately no longer online) highlights the three most common checking fees: (from GOBanking Rates.com):

Most major U.S. banks continue to charge high fees when customers overdraft their accounts, according to a new report issued Tuesday. More than two out of five banks also rearrange their processing of account holders’ transactions with a procedure that maximizes overdraft fees, said the report by The Pew Charitable Trusts, an independent, non-profit organization.

Key questions for your students:

• What are the three most common checking fees?
• What is a good strategy to avoid each of the three?

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Here’s a good video from Money if you specifically want fee comparisons between brick-and-mortar, online, and credit unions:

Banks make a killing whenever you overdraw your account. U.S. banks charge an average of $35 per day in overdraft fees, according to new research from Pew Charitable Trusts. And if you think your small, Main Street bank will treat you better than the big banks do, think again. In a new survey of 45 smaller banks, Pew found these institutions allow customers to rack up at least $90 a day in overdraft fees—and many set the limits much higher.

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Looking for a great project to demonstrate the pain caused by multiple overdrafts in a day and how bank policies can vary? Check out this perennial NGPF favorite Overdraft Fee Analysis

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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