How to Avoid Overdraft Fees
Posted: Monday, September 21, 2009
by Tim Smith
Probity Financial Services
When you're living on a tight budget, it's easy to spend more money than is in your checking account. When this happens, the bank will charge you a large fee for overdrawing your account. How do you prevent this from happening? Here are a few tips on how to avoid overdraft fees.
1) Keep a register
Check registers may seem old and outdated, but if you write down how much you spend each day and subtract that from what you know is in the account, you'll probably have a more accurate number than the bank. If you deposit something after 4pm, the money won't show up in your account until the next day.
Keep a few hundred dollars in your account for the purpose of saving you from overdraft fees. In other words, make a commitment not to spend it. The convenience of this method is that you don't have to keep a register or worry about the math. If your account balance goes below the amount you've kept in, you'll know that you've stepped over your spending limit and need to take another look at things.
If you're living off of a very small income, it's still possible to gradually save up a cushion. Put away ten or twenty dollars each month until you reach your goal. Twenty dollars is still less than a single overdraft fee in most scenarios. And regardless, consistently having money in your checking account means that you will earn interest on that money.
3) Use debit
By selecting the "debit" option, when paying with your debit card, you avoid some of those pesky holds on your money. By selecting "credit" instead, the vendor may put a hold on more funds than are actually available for a few days until the transaction clears. If you try to spend the funds that the vendor has a hold on, you will most likely get hit with an overdraft fee.
4) Opt out
Most banks automatically sign you up for an "overdraft protection program." This allows them to cover any purchases you don't have the money for and then charge you a fee. If you use checks, this may be better than getting a bounced check fee which varies in size from vendor to vendor. If you use a debit card, it is much more effective to simply have your card declined when you don't have enough money. You can usually opt out of the overdraft protection program by going in and talking to a bank representative.
5) Shop around
There are options out there that can help you not to overdraft your account. For instance, an online budgeting tool might make life easier without a paper mess. There are also alternative banks that don't charge overdraft fees or inform you of an overdraft via something else besides snail mail. Keep in mind that you are looking for products that will help you prevent unexpected overdraft fees.
Don't let overdraft fees continue to be a major setback. By keeping track of your funds, saving a little, and making a few smart decisions, avoiding overdraft fees can be simple and easy.
For a checking account that doesn't charge any overdraft fees, visit http://www.probityfinancialservices.com.
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