How did this happen to you…again?
You were certain you had enough money in your checking account to make that purchase. Unfortunately, you forgot about that automatic car insurance payment that came through yesterday and brought your available balance down lower than you thought.
Now, you’re stuck with yet another overdraft fee — not something you appreciate much when you’re already having a hard time making ends meet.
Only a kind-hearted customer service rep at the bank can save you now from that fee. However, there are many ways that you can avoid more of these fees in the future.
Check out these 5 ways to avoid overdraft fees.
1. Decline Overdraft Protection
This might sound backwards, but you read that right. Overdraft protection programs allow you to swipe your debit card for a purchase that will overdraw your account. So if you have $25 in your account and buy something for $50, the bank will loan you the extra $25 — and slap you with an overdraft fee in the ballpark of $35. Average overdraft fees in 2020 were $33.47 according to Bankrate.
What’s more, you might not even know that you overdrew your account. Plus, you can rack up multiple overdraft fees if you make multiple purchases before you realize what has happened.
So, overdraft protection saves you the embarrassment of not having money at the checkout counter, but the cost may not be worth it.
2. Set a Low-Balance Alert
You can set up alerts with your bank, so you’ll receive an email or text when certain things happen. For example, you can be notified when your account balance drops below a certain dollar amount.
3. Monitor Your Account
Even with a low-balance alert set up, you should still keep an eye on your account. It’s still possible to overdraw, particularly when making a large purchase. For example, you might have arranged to be notified when your account balance drops below $200. But if you buy something for $250 and have $225 in the bank, you’ll still overdraw.
Additionally, you might not have noticed when the alert came through. It’s a good idea to get in the habit of checking your account regularly, particularly before making a large purchase.
4. Use a Credit Card
Another way to avoid overdraft fees is to not use your debit card for purchases. You can use a credit card instead. As a bonus, you can make money in rewards for each purchase if you choose a card with these benefits.
However, we mention this strategy with a caveat. Monitor your purchases and ensure that you can pay off your entire credit card balance each month. This allows you to enjoy the rewards of using a credit card without being saddled with a bunch of unneeded credit card debt.
5. Find a Bank That Doesn’t Charge Overdraft Fees
Newer competition is in the market and there are some banks that don’t charge overdraft fees. These tend to be online banks that have a smaller overhead and don’t have to charge their customers as many fees to make money. Additionally, the interest they pay on savings accounts may be higher — another benefit.
Another possibility to check out is your local credit union. Some are restrictive about who can join, but many pay higher interest and charge fewer fees. All it takes is a bit of research.
Stay Free from Overdraft Fees
Nobody wants to find out they’ll have to pay a hefty fee for a small oversight. Thankfully, by following these 5 tips to avoiding overdraft fees, you can stay overdraft fee-free and enjoy keeping your money where it belongs — in your bank account.