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In order to receive the lowest overdraft interest rate from financial institutions, consumers must be willing to sit down with their account representative and be able to explain why a reduced fee should be applicable. There are several reasons to request a reduced interest rate, and recent financial difficulties, high credit scores, or transferring to a new bank are just a few. An alternative method would be to link a credit card to serve as an overdraft protection, because even though the interest rate may be comparable, there is normally a grace period associated with credit cards. A final method would be to link a separate bank account to serve as a form of overdraft, perhaps a savings or money market portfolio.
When dealing with financial institutions, is it relatively easy to think that loyalty on the part of the consumer equates to the lowest possible overdraft interest rate. There is possibly no statement less true within the world of banking, and unless a reduction of fees is requested, the bank would never even consider doing so. If a customer service representative claims that the account is not available for a lower overdraft rate, often a sound strategy would be to mention switching to other financial institutions. Banks will often work much harder to secure the business of a new client, so this is the optimal opportunity in which to negotiate a lower overdraft interest rate.
Possibly a more sound approach would be to forget about overdraft interest rates altogether and implement a credit card to serve as overdraft protection. Many consumers will reserve one of their various lines of credit especially for this purpose, and if their bank account ever accidentally goes into negative figures, funds are taken from the credit card instead of the overdraft fee. Almost every major bank accepts credit cards as a form of overdraft protection, but it is not advertised anywhere within their branches simply because it limits their profits.
Another smart method to avoiding an overdraft interest rate and other bank fees is to open a savings account within that same institution. Many consumers that have direct deposit through their workplace will opt to have $5 to $10 US Dollars (USD) from each paycheck applied to a savings account, with the rest falling into the normal checking account. If either account balance ever falls into negatives, the funds are automatically taken from the additional account without any fees or penalties being placed on the consumer. This is considered a smart business strategy to avoid paying an overdraft interest rate and it is also a great way to begin saving money for a vacation or simply a rainy day.
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