One solution to overdraft fees: find a bank that doesn't have them

I've written a lot about bank overdraft fees lately, and so I thought I'd mention to the WalletPop world: Probity Financial Services.

Probity Financial Services is an online bank that offers a checking account with no overdraft fees. As it says on its website: "None, nada, never."

If you use a debit card a lot, or write a lot of checks, and you're constantly off by a few dollars and being slammed with bank fees, this could work out well for you. So if one day you wake up and realize you spent too much, and you're $43.22 in the negative in your bank account, you simply put money back in your account when you can and move on. There are no fees. You won't suddenly find yourself with six bank fees each worth $37.50 and realizing that you've just given your monthly grocery bill to the bank.

It all sounds wonderful, and I'm sure it is, but there are several things to be aware of.

First, there is a monthly fee (which Probity makes clear about on the web site). You will need to pay $19.95 a month for the privilege of not having an overdraft fee. More on this in a moment.

The overdraft protection that you receive is $250 from the moment you sign up, and then $500 after being a good and "active" customer for 90 days, because, no, the bank isn't going to let your account go $567,890 in the negative. So if a $600 payment tries to go through on your debit card, it won't be able to go through. Ditto with a check, which will be returned, if you're past their $500 overdraft protection.

And it's good to know that if you use an ATM, while Probity won't charge you, the other bank probably will. But Probity points out that there's a way around that -- ask for cash back when you're using your debit card on a purchase.

The bank is FDIC-insured. In other words, it's a regular bank, where your money is protected by the government, just like any other out there.

So far, so good. That said, I think this would be a difficult bank for anyone who doesn't have direct deposit from an employer. In that case, you have to mail in your check, or get a financial institution to send your money into Probity Financial Services. For self-employed people who receive checks in the mail, using Probity will mean more time and money just trying to replenish your account.

Obviously, the big downside is the $19.95 a month fee. Over a year, that's $239.40, which is a pretty expensive price to pay for using a bank, which is making money in interest off of your money (although it's a bargain if you're routinely spending several hundred dollars a year or more in banking fees). That $239 per year is the reason I've held off writing about Probity for WalletPop.

But then Kristin Morgan, a spokesperson for Probity, and I began discussing over email these overdraft fees, and she referred to this online bank as "the Netflix of banking."

She added, "When Blockbuster was reaping huge profits on late fees, Netflix came in and offered a solution for one flat monthly fee."

And suddenly I saw Probity Financial Services in a new light. Yes, I think it would be better if the bank had a more Netflix-friendly price -- I pay $8.99 a month for Netflix, though you can spend more a month for more movies -- but this no overdraft fee thing is kind of new territory for a bank. You have to start somewhere. And one thing banks could probably use is a little more competition. Maybe if Probity manages to Netflix the banking industry, flat fees will go down.

Or up, of course, which is a scary proposition.

Sure, in a perfect world, everyone would manage their money to the decimal point, and never make a mistake, no matter how tricky banking becomes. But it is an imperfect world, and it's an imperfect banking system we have here. Probity just may be the solution to a lot of banking woes for some people.

Geoff Williams is a freelance journalist who often writes about banking and money woes. He is also the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).
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