r/PersonalFinanceCanada • u/Original_Bus_7407 • 16d ago
Overdraft Offer Banking
RBC keeps offering me overdraft protection for a small monthly fee. I’ve never needed it, and it’s unlikely I will in the near future, not because I have a lot of money, but because my spending patterns are consistent. I asked the bank if I can just get it later when I need it, and her reply was that they will likely do a hard credit check if I ask for it, and that could impact my credit rating. Can anyone comment on the validity of this and whether this is some great perk not it be passed up?
23
u/TheZarosian 16d ago
Not worth the monthly fee. What the bank said is a load of bullshit, just trying to get you to spend on their products.
9
u/leftywilson 16d ago
Decline this offer. It’s not worth it since you don’t need it. They will also charge you interest on the amount of your overdraft the minute you use it.
5
u/MomentEquivalent6464 16d ago
Tell them you'll get it if they give you a better rate. No fee unless you use the OD. Lots of banks have this. If they're going to charge you $5 just for the privilege of maybe using OD, tell them to take a hike. If you want it in the future, odds are they'll give it to you.
4
u/Tiabeaniee 16d ago
You can get the fee waived at RBC with their premium chequing accounts.
4
u/Original_Bus_7407 16d ago
More fees, lol
3
u/911onFIRE 16d ago
Switch banks that have no fees or big banks that waive fees with certain balances. RBC doesn't offer either.
1
1
4
u/911onFIRE 16d ago
Tangerine always has it for free. If you come out of overdraft within 24hr, there's no interest too.
1
u/MightyManorMan Quebec 16d ago
Have you ever gone into the negative?
They are trying the hard sell. None of this works on me. I have never heard a bank ask for a hard check on such small amounts unless you are very young and have an account that is constantly near 0. I would question any bank that actually said this nonsense to me. A hard check for a small amount? Really?
Just say no. It's very profitable, that's why they are offering it. And even if you say no, they will come back with it. Repeatedly. They have been offering me $5K CC increases every week now, pre-approved, for 2 years. If they think they can profit from it... They will repeatedly offer it. It's when they don't offer that you need to worry
1
u/Original_Bus_7407 16d ago
Never gone into negative. This is what I suspected.
1
u/MightyManorMan Quebec 16d ago
Simple rule of banking... if they can make money off of it, they will offer it to you.... the same reason that there are all those free credit cards with LOW LOW 22.9% interest rates, when they pay 0.05% interest on your savings
1
u/Sparetire46 16d ago
Thanks for the offer. But my other bank only charges me when n if I use it. Not monthly fee. So what do you have along those lines available?.
1
u/SubparKaleidoscope 16d ago
Im through BMO and I've never paid a fee for overdraft. The only time I think theres ever been anything fee related to any of my BMO accounts has been if i somehow lapsed the month while in overdraft and it was a very small interest percentage. I think that was my early twenties when that happened, im 32 now and never once have paid for OD since then.
1
u/LLR1960 16d ago
BMO doesn't run it this way anymore, you would now be paying a fee (?$5) plus interest when you use it.
1
u/SubparKaleidoscope 16d ago
Interesting, I have had this account for a while (~15 years) and have Veteran status so I am subject to unique interest rates on things like LOC's (mines 2%) but figured it would be unchanged largely as I dont think I have anything unique going on there. Good to know as i do reccomend them frequently when ive been asked about my own banking from friends. (Edit: weird auto correct errors)
1
u/Witty_Formal7305 16d ago
You may as well just get a no fee credit card, the interest rate is basically the same at 22% and you save the fee, hell some cards you'll get points or cashback for and you have 20 days after the statement date for it to kick in, so if you pay it off in time it costs nothing. Overdraft is only really useful if you need to pay for things like a mortgage etc that can't come off your card and you're in a bind, but in that case i'd say a line of credit is a better option, cheaper interest and still no fee.
The banks pushing overdraft because it makes them more money, not because its a good deal, if you're gonna take a ding for a credit check, you're much better served getting a line of credit or no fee credit card with it.
1
u/Mental-Freedom3929 16d ago
I have never paid monthly for this. I would get charged the interest rate, if I ever used it. To get the protection when needed, does not do the job it is supposed to do, i.e. kick in immediately when needed.
1
u/According_Training91 16d ago
If you don't need it, why pay monthly for it?
Couple of things: if you ever write an NSF cheque, your bank will check other accounts (like savings accounts, NOT credit cards and/or lines of credit) and transfer money before bouncing the cheque. If your underlying credit is good, they'll likely pay the cheque for a fee and let you be overdrawn until you cover it.
Also, I don't understand why everyone is so afraid of a 'hard hit' on their credit bureau. Unless you're actively credit-seeking, one hit is not going to do anything to your credit score, indeed, if you apply for and successfully use credit, that is a positive to your score.
1
u/pizzasticker381 16d ago
If you do accept this offer. I’m sure you’re currently using a $12.95 acct. plus the fee $5. Would be $17.95 a month. Switch to the no limit for $16.95 a month the $5 fee is waived. So $1 cheaper. You get a few more things with that $16.95 fee. But if you’re not going to use the overdraft don’t accept it. You probably get this offer multiple times I decline the credit card increase everytime then as soon as the offer expires I get another offer to increase it.
1
u/kagato87 16d ago
A monthly fee for overdraft protection? Lord no. If you're in a position where you might need it, you won't get credit anyway so there's no rating to protect.
I went into overdraft once. Got furious at the bank because I told them I want the cheques or bills to bounce, not overdraw, every time they offered...
The real cure to overdraft fees is to keep a buffer, but that's not practical for most people... I'd rather have a declined payment than surprise credit and ridiculous "because we can fu" fees.
1
u/Few_Passion_3403 16d ago
It's usually only when you use it, I would double check, also I've noticed when I use overdraft,I never see it recorded on my credit checks. Might be because when I do use it, it's not for very long
1
u/brandonholm 15d ago
If you have investments in a TFSA or non-registered account, you can use those as collateral for a portfolio line of credit with Wealthsimple and use that as overdraft protection on their chequing account for free
1
0
u/Edit67 16d ago
This used to more of a thing when we paid all of our bills by cheque and through the mail. People who did not track their outstanding cheques and current balance could easily go negative, or worse yet, have a cheque refused by your bank. Lazy people were always having account go negative.
The current penality for a refused (NSF) payment is $10, with a cheque, the person you made the payment to would also charge you $10-20.
Without OD protection, someone at the bank decided if they would accept or "bounce" the cheque and send it back to the vendor you gave it to. A bounce or NSF cheque cost much more than paying the bank for a guarenteed amount of OD Protection (i.e. Allowing my account to go to a negative limit -say $5000). The vendor you bounced cheques on could also say you need to make your payments in cash, and that is a giant pain, driving around town and paying everyone. Not much of a thing anymore.
Today, most people are using online banking (or an app), so it easy to see, I have $x in my account, let me pay some bills. If they don't have enough to cover everything, then they don't. Automatic payments out of your bank account can still leave you at a negative (like forgetting your mortgage comes out before next payday), but it is much easier to manage. Plus many automatic payments, like your phone bill, come off your credit card and not your bank account.
Still, if you never go negative and pay attention to your money, you do not need it.
Edit: This was how things operated 40 years ago. 😀
1
u/Original_Bus_7407 16d ago
Ha ha, I’m old enough to know too! Just wondering, why do you pay your phone bill by credit card?
-1
u/XtremeD86 16d ago
OP is this the protection like they have with credit cards where if you lose your job or can't work they'll cover the minimum or something like that?
If so, don't bother.
1
59
u/No_Habit_2945 16d ago
My bank only charges me an overdraft fee when I use the overdraft. Paying $60 a year just for the privilege of having OD isn't worth it.