Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
Updated on Monday, May 13, 2019
Everybody has experienced that moment when you wish you could turn back the clock and stop yourself from committing some embarrassing error. While this isn’t possible in real life, Wells Fargo’s Overdraft Rewind feature will let you undo the understandable but costly mistake of overdrawing your checking account.
Americans pay billions of dollars each year in overdraft fees, with the Consumer Financial Protection Bureau reporting we paid $17 billion in overdraft and non-sufficient fund fees in 2016 alone. Those fees accounted for approximately 65% of all the penalties deposit holders paid to those banks during a 12-month period ending in September 2016, underscoring how expensive this bad habit can be.
Wells Fargo’s Overdraft Rewind program, which is automatically applied to every checking account, waives the overdraft fee from certain transactions that leave your account with a negative balance, so long as it receives a direct deposit covering the deficit by 9 a.m. local time the next day.
“In 2018 alone, we helped more than 2.3 million customers avoid overdrafts with the overdraft rewind feature,” said Jim Steitz, a spokesperson for Wells Fargo.
How does Wells Fargo Overdraft Rewind work?
While the name Overdraft Rewind might make you believe you can undo every bad transaction you’ve made, the feature’s utility remains somewhat limited in scope. If you make a transaction that puts your checking account into a negative balance, where you don’t have enough money in your account to cover a charge you’ve made, Wells Fargo hits you with its $35 per charge overdraft fee. However, if the account receives a direct deposit by 9 a.m. local time the following day that covers the negative balance, the bank will waive the fee.
Here’s a real-life example to better illustrate how Wells Fargo Overdraft Rewind works. It’s Thursday night and even though you only have $25 in your account — times are tough — you go out to see the new “Avengers” movie at an Imax 3D theater, spending $30 on a ticket for one. You’ve overdrawn your account by $5 and Wells Fargo levies a $35 overdraft fee.
Fortunately, tomorrow is payday, and your account is credited with a $400 direct deposit before 9 a.m. Wells Fargo adjusts this to $395 and waives the $35 overdraft fee — and everyone’s happy. Unlike other forms of overdraft protection, you don’t have to remember to opt in to Wells Fargo Overdraft Rewind — it’s automatically enabled with every checking account.
Wells Fargo Overdraft Rewind won’t protect against everything
The specific situation Wells Fargo Overdraft Rewind guards against is overdrafts occurring right before payday from an employer or any other depositor using an automated clearing house (ACH), which handles direct electronic payments for banks and other financial institutions.
That means you can’t go on a spending rampage on Amazon.com one night and then deposit sufficient funds to cover your negative balance in the morning — the payment to your account has to be via ACH direct deposit for Overdraft Rewind to save you from yourself.
You should also be careful about purposefully overdrawing your account the day before a scheduled direct deposit payment. Remember, when you overdraw your account with a transaction between you and a merchant, the bank is stepping in and paying the merchant the amount you couldn’t because you didn’t have the money in time.
Wells Fargo is under no obligation to pay, and in fact, says on its website, “The payment of transactions into overdraft is discretionary and the bank reserves the right not to pay.” In that case, your transaction would be denied at the point of sale and you could also get slapped with a $35 non-sufficient funds fee by Wells Fargo.
Does Overdraft Rewind replace other types of overdraft protection?
Given the limited scope of Wells Fargo Overdraft Rewind, you can’t depend on it to shield you from all possible overdraft situations. Like many other banks, Wells Fargo offers a service it calls Overdraft Protection, which allows you to link a savings account, a credit card or a line of credit (such as a home equity line of credit) to your checking account. When you make a transaction that would otherwise cause your checking account to be in overdraft, money is transferred from the linked account to cover the cost and prevent the overdraft.
However, Wells Fargo’s Overdraft Protection is not always free. It costs $12.50 per transfer from a savings account — which also counts toward the six free transfers you’re allowed per month from the savings account — and the fee varies if you are transferring from a credit card, based on the terms of your individual card. There’s no fee when the linked account is a line of credit, but keep in mind Wells Fargo will transfer a minimum of $25 from your linked account to your checking account (if that linked account has a balance of less than $25, the bank will transfer the entirety of that money toward paying your overdraft).
If you realize you’ve overdrawn on your account and you know there’s no ACH payment coming to activate Overdraft Rewind, you still have one more option to dodge the $35 overdraft fee: Make a deposit that covers the negative balance before the end of the business day. This cutoff time varies depending on how you make your deposit, but Wells Fargo’s website states most ATMs have a cutoff time of 9 p.m. while any deposit made via the bank’s mobile app needs to happen by 9 p.m. PT.
How to avoid overdraft fees no matter where you bank
While mistakes do happen, repeatedly overdrawing your account isn’t a financial habit you want to cultivate. Here are some steps you can take to minimize the risk of overdrafts eating into your savings and having the bank teller give you the stink eye.
- Set up account alerts that let you know when your balance is approaching zero: Knowing exactly how much money you have in your account is half the battle when it comes to avoiding overdrafts. You may think you have a steel-trap mind able to keep track of all the purchases you make with your account, but why leave it to chance? Almost every bank has some sort of mobile app or method of setting up an alert to let you know when you’re teetering dangerously close to a negative balance, so make sure you avail yourself of an opportunity to protect your money.
- Don’t opt into an overdraft protection plan: In 2010, the Federal Reserve Board set regulations that state that banks and financial institutions can’t charge overdraft fees for one-time debit card or ATM charges, meaning the transactions would be declined if you didn’t have enough money to cover them. Make certain you didn’t accidentally opt in to overdraft coverage with your bank. That way, your transaction will simply be declined at the point of sale.
Nobody’s perfect and getting hit with an overdraft fee isn’t the worst thing that could happen to your finances, but following the above tips should prevent overdrafts from haunting your account.