Consumers who have Capital One 360 checking accounts should be wary against potential overdraft fees, which may not have been charged fairly to their accounts.

Capital One 360 checking accounts are marketed to be easy and low maintenance bank accounts for customers, who should not have to worry about their accounts becoming unexpectedly overdrawn. Capital One promotes its Capital One 360 checking account as the first paperless checking account in America, offering all-electronic service.

The bank’s website states that Capital One 360 accounts will allow customers to use online Bill Pay, along with cash access and a Capital One 360 Checking MasterCard debit card. The account also provides checking access, along with earning points through savings.

Even though the Capital One 360 checking account is supposed to provide consumers with minimum difficulty, consumers should be vigilant for any suspicious overdraft fees.

Overview of Capital One Overdraft Protection

Overdraft fees, also called insufficient fund fees, incur when the consumer’s primary account becomes overdrawn and the bank takes action  to cover the purchase. Depending on the service, the bank may simply front the funds, or it may automatically transfer funds from a linked savings account or a line of credit.

After the service is done, the bank will then impose a service fee that can be paid at a later time. Many banks offer overdraft protection bundled in the terms of a new account to cover checks and electronic transactions that function like checks. The bank must get the customer’s consent before extending protection to ATM and debit transactions.

The way Capital One describes its overdraft protection, is giving customers “control” and that they decide what to do with their accounts once the balance becomes insufficient.

The bank says that for customers who choose Auto-Decline, it will typically decline any transactions that will overdraw the consumer’s accounts. Customers can choose other options, though.

Capital One offers a service called Next Day Grace, under which it may choose to pay transactions that would overdraw the account otherwise. However, Next Day Grace authorizes the bank to consider a variety of factors when determining whether or not to cover the customer’s overdraft. According to the bank’s website, the bank typically makes the decision based on the size of the transaction and if the account is in “good standing” or if the customer has had other overdrafts incur.

If the bank does decide to pay for an overdraft transaction under Next Day Grace, the consumer has no right to defer payments and they must deposit additional funds to the account to cover the overdraft expenditures. Consumers might be able to avoid the Capital One overdraft fee if they pay the amount overdrawn within a single business day. Otherwise they will face a $35 overdraft fee.

Customers can opt into Free Savings Transfer, which will automatically transfer available funds from their savings account or money market account. Customers can also apply for a line of credit that can be used to cover overdraft transactions. The customer will have to pay back this automatic loan with interest, based on the length of time the consumer borrowed the money.

Consumer advocates are now keeping an eye out for overdraft practices at Capital One and other financial institutions that could run afoul of banking laws. If you believe you have been assessed improper overdraft fees, you may qualify to participate in a free class action lawsuit investigation.

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