While it might feel like a comfort to know you’ll be covered should you ever slip up and write a check your account can’t cash, the cost of that protection can far outweigh the benefits.
An overdraft of as little as one penny can trigger up to $35 in fees. Most people would agree it’s better to forgo that purchase than pay $35 more than is really necessary.
With that in mind, let’s take a look at how to avoid overdraft fees.
Keep Extra Money in Your Checking Account
When calculating the balance of your account, deduct anywhere from $50 to $100 from your actual balance. This, in much the same way as people who tend to run late for things set their clocks 15 minutes ahead of time, will keep a cushion in place to help you avoid spending more than you have.
Another similar technique is to round your purchases up to the next dollar. An expenditure of $14.75 gets logged as $15 in your register. Do this consistently and you’ll always have extra money in your account.
Don’t Accept Overdraft Coverage
Banks have become rather slick in the way they get you signed up for costly services. Instead of waiting for you to say yes, they may sign you up automatically and task you with opting out.
In other words, they enroll you without your permission, then say the only way to avoid the charges that enrollment imposes is to inform them you don’t want the service. You know, the one you never asked for in the first place? It’s insidious and so far they’re getting away with it.
So “opt out” of overdraft protection.
Review Your Bank Statements Carefully
Losing track of your spending with plastic is easy, as many people have noted in Freedom Debt Relief reviews during the settlement process. Monitoring the ebbs and flows of your account via the monthly statement helps you keep an eye on little charges that may otherwise go unnoticed.
The bank may have added a checking account fee of which you were unaware — or forgot. Those extra $.35 “transaction costs” at gas stations and other places that impose debit card surcharges can add up as well.
It’s easy for those cents to aggregate into dollars without you realizing it.
Enroll in Automatic Alerts
Thanks to the wonders of digital banking, your accounts can be set to trigger alerts. You can be warned when they fall below certain balances, or when transactions above certain thresholds are completed. This helps you keep a running tally of your balance in your mind, which can prevent overdrafts from occurring.
Spending with a debit card makes it easy to lose track of how much money you actually have. These alerts can serve as “canaries in the coal mine” to let you know when your spending is about to trend into the negative.
You can also get alerts informing you of your account balances each morning.
Have Overdrafts Come from Another Account
Again, thanks to the magic of digital banking, you can have your account linked to another account from which funds can be withdrawn should the balance of the primary account be insufficient to support a purchase.
This coverage can also be tied to a personal line of credit. Yes, there will be fees associated with these overdrafts as well, but they are far more affordable. Further, your spending won’t go negative and give you the actual overdraft to repay in addition to the imposed fee.
Frankly though, the best way to avoid overdraft fees is pay attention. Doing so is far cheaper than paying fees will ever be.