8 Ways to Avoid Overdraft Fees
Part of what makes checking accounts and debit cards so appealing is that, unlike a credit
card, you can’t spend more money than you have – right? Not necessarily. You can opt into
overdraft protection, allowing you to complete a transaction that exceeds your account balance
– for an overdraft fee, of course. However, most overdraft fees are avoidable. Consumers can
use the following account management tips to prevent extra charges:
- Use direct deposit for your paycheck. You will have access to your paycheck
- Keep track of your balance and transactions, and don't forget about automatic
payments. Today, it is easier than ever to check balances and transactions online, by
phone, or at the ATM, 24 hours a day. Some banks even offer mobile banking so you
can check your balance on your cell phone. However, keep in mind that those balances
will not reflect transactions you authorized that have not yet reached and been
processed by your bank.
- Keep a "pad" or cushion of money in your checking account just to be safe.
- Link your checking account to an overdraft line of credit, savings account, or
credit card. These are usually less expensive alternatives, but remember that for
overdraft lines of credit and credit cards, you have to pay it back. The amounts are
usually not automatically repaid from new deposits into your checking account.
- Find out if your bank will allow you to "opt-out" of overdraft protection. However,
ABA surveys show that most consumers prefer having the security of knowing their
transactions will be covered even if there is a fee.
- Ask your bank for a small line of credit that will cover you if you overdraw your
account. Just be sure to pay it back as soon as you get the bill.
- See if your bank offers automatic notification when your balance drops below a
certain level. You may be able to get notified by text message or email.
- Change banks if your bank doesn't offer the services you would like, or charges too
much for overdrafts. There are literally thousands of banks competing for your business.