Overdraft continues to be a problem even after the government rules let consumers opt-out of debit card and ATM overdraft by default.
According to a report by the Consumer Financial Protection Bureau released in June, 28% of checking accounts had at least one overdraft, and 8% of accounts had more than ten overdrafts in a year. Among the accounts that had at least one overdraft, the average overdraft fee paid was $225 in a year. That’s just crazy.
Not opting-in for debit card and ATM overdraft does not stop overdraft, because there are still checks, online bill payments scheduled ahead, and pre-authorized ACH debits that can come in by surprise. The best way to stop overdraft is not better tracking (who has time?) or a larger cushion (a luxury for many). The best way is to use an account that will not overdraft, period, by design.
Bluebird from American Express is one such account. I wrote about it when it first came out in 2012. Since then it got better by adding FDIC insurance, check-writing, and separate buckets within the account for different goals called SetAside.
You can direct deposit your paycheck, transfer from another bank account, and deposit paper checks by mobile phone to a Bluebird account. You get a debit card with access to free ATMs all over the country. You have free online billpay. You check your balance online and on mobile. Bluebird does what most people need in a checking account and more, with no minimum balance and no monthly fee.
A key difference between Bluebird and a traditional checking account is that Bluebird deducts every outgoing payment from the available balance immediately. There’s no ambiguity in how much is left to spend in your account.
The way Bluebird handles checks takes advantage of the technology. You tell them online or in the mobile app how much you are writing a check for. You get a pre-authorization code back. You put the pre-authorization code on your check.
Getting a pre-authorization code serves two purposes:
- It makes your check secure. If someone forges your check, it will not be paid because it doesn’t have a valid code.
- It sets the money aside the moment you write the check. You are guaranteed not to overdraft when the check comes in.
American Express should get a patent for this. In the pre-Internet days, you couldn’t tell the bank about the checks you wrote. In an Internet connected world, at other banks you are still supposed to track your outstanding checks with a paper register. Really?
Online bill payments in Bluebird are also taken out of your available balance immediately. You don’t have to worry about forgetting when one will hit.
ACH debits? They are blocked, not allowed. You are in complete control of the Bluebird account. Nothing comes at a surprise.
If you or a family member worry about overdraft or dipping below the minimum balance for waiving a monthly fee, consider using Bluebird. Paying overdraft fees is crazy. Asking the bank to waive the fee after it happens is a hassle. You shouldn’t have to worry about it ever happening to begin with.
Bluebird does it better with modern technology by design: it’s just not possible to overdraft or drop below a minimum balance when there is none. It’s a truly disruptive product for a day-to-day spending account. What you see in the account is what you have, at all times. You only spend what you have. It’s the way a checking account should be all along.
[Photo credit: Flickr user afagen]
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This is false; While Overdrafts are far less of a common occurrence, than with your standard traditional Checking accounts used today, Overdrafts are much less common but they are in fact AN ENTIRELY POSSIBLE OCCURENCE for users!!! They are safer in ways, but like every other technological security advancement; it still wields it’s fair share of instabilities and weaknesses. An improvement? Yes. A solution? Not even close.
Harry Sit says
Please don’t leave us hanging. Tell us when you would get an overdraft and what happens after you get an overdraft. If you don’t have enough balance on the card, will your purchase at a store go through anyway? Are you able to get cash an ATM? Or is it that your bill payment will still go out? After you get an overdraft, are your charged a $35 fee for each subsequent purchase or bill payment?
Lisa Carlisle says
Thanks for this great alternative information Harry! I have been a proud Bluebird User since its creation! No fees, direct deposit, and accepted anywhere American Express is taken 🙂 I had one question about the Bluebird checks, are our routing numbers and checking account numbers printed on them? I need to provide a voided check for direct deposit and my employer is refusing to accept a printout :/ Thank you! -Lisa
Logan Allbright says
I have negative 12 in my account. Happens often. No fees. My card will simply be declined now. My direct deposit today will fix the neg amount. Used bluebird for ages. Banks can eat a butt.
I love blue bird card. My child 13 has his own card and I load money as need be. This is good for when you don’t want to give the caretaker money. You can keep up with expenses been spent. The other good thing you can set limits.
Shirley J Wolf says
How do I get pre-Authorizationcode so I can use my checking account
Harry Sit says
“Each Bluebird Check must be pre-authorized before you write it. Log onto your Bluebird Account or Bluebird Mobile App and click the “write a check” button.
– The 4 digit check number (found on the upper right corner of the check)
– The check amount
Once approved, a Pre-Authorization Code will be provided, and funds will be debited from your Bluebird Account in the amount of your check.
If you are obtaining pre-authorization for a check over $2,000, it will not be approved immediately online. You will be asked for more information for processing, and it can take up to 2 business days for a decision. DO NOT write the check until you have received an e-mail with the approval and a Pre-Authorization Code for your check. For your protection, only checks that are pre-authorized will be honored by us; any check that is not pre-authorized will be declined, even if your account balance is sufficient.
Checks expire after 180 days from pre-authorization. An expired check will not be honored by us; any check that has expired will be declined, even if your account balance is sufficient.”