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Key takeaways
- Regularly monitoring your bank account allows you to adjust your spending in real-time and prevent transactions that could push your account into the negative.
- Most banks will send notifications when you have a low balance. These alerts can act as a timely reminder to deposit funds or halt further spending.
- A lot of online-only banks have fewer fees including no overdraft fee.
Any time your checking account balance goes negative – you withdraw more money from your account than you have in it – your bank may charge you an overdraft fee. Overdraft fees vary by bank but are typically around $35. And you will be charged not just once, but every time you make a purchase with a negative balance. This means you could easily be charged $100 a day!
Overdraft fees are a costly unnecessary expense. But you can avoid them by following these seven tips. Let’s explore how you make overdraft fees a thing of the past.
1. Opt-Out of Overdraft Coverage
Many banks offer overdraft coverage as a “courtesy,” but it comes at a steep price. This service allows transactions to go through even when your account lacks sufficient funds, leading to overdraft fees. The simple solution? Opt-out. By doing so, transactions that would overdraw your account are declined or returned unpaid. While it might be inconvenient to have a transaction declined, it can save you from hefty fees. Contact your bank to see if you’re enrolled in any overdraft service and ask how you can opt-out.
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2. Monitor Your Bank Account Regularly
Regular monitoring of your bank account is essential. With digital banking, it’s easier than ever to keep an eye on your balance and transactions using your bank’s mobile app. Frequently checking your account can help you spot any unauthorized transactions and ensure that you’re aware of your balance before making purchases. Also, be sure to keep tabs on any bills or subscriptions you have on autopay that could cause an overdraft. Review your account activity at least once a week and add a little extra cash if you can so you’re sure to cover any forgotten or unexpected charges.
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3. Set Up Low Balance Alerts
Most banks now offer customizable alerts that can notify you when your balance falls below a certain threshold. These alerts can be received via email, text message, or app notifications. Set up a low balance alert to give yourself a buffer to transfer funds or curb spending before your account reaches zero.
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4. Find a Bank with No Overdraft Fees
As consumers become more fee-conscious, a growing number of banks are offering accounts with reduced or even no overdraft fees as a selling point. Online banks are at the top of this trend since they have lower overhead costs and often have a lower fee structure overall. Shop around for a bank that has low overdraft fees, only charges a fee if the overdraft is more than $50, or will waive the overdraft fee if you pay within a few days. A little research could save you a significant amount in fees.
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5. Get a Prepaid Debit Card
For those who want to strictly control their spending, a prepaid debit card can be an excellent tool. You can only spend what’s loaded onto the card, which means there’s no risk of overdrawing your account. While these cards often come with their own fees (including for declined transactions,) they usually cost less than multiple overdraft charges and can help you stay within budget.
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6. Transfer Money ASAP
If you notice your account is low or has gone negative, transfer money into it as soon as possible. Some banks offer a grace period in which you can avoid overdraft fees if you bring your account balance back up within a certain amount of time. Mobile banking can be a lifesaver here, allowing you to transfer funds instantly from another account.
7. Link to Another Account
Many banks allow you to link your checking account to a savings account or line of credit as overdraft protection. If you do overdraw, the bank will transfer funds from the linked account for a smaller fee than a standard overdraft charge – or sometimes for free. This service can be a financial safety net, but remember to replenish your linked account to avoid depleting your savings, maxing out your credit, or paying hefting interest charges.
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Final Thoughts
Avoiding overdraft fees is all about being proactive with your finances. Choose the right bank, monitor your accounts, and set up alters. Do what works for you to avoid these unnecessary charges. It’s about putting yourself in control of your financial situation, rather than letting it control you. With the right habits in place, you can say goodbye to overdraft fees for good.
