There are many reasons why watching how much you spend is important and overdraft fees are one of these reasons. When you take out more money from your account than you have and your balance falls into the negative, financial institutions will often penalize you in the form of an overdraft fee. While the specific fee may vary from bank to bank, overdraft fees are an easy way for banks to take advantage of your mistakes. These fees are especially irritating because they are easily avoidable as long as you follow a few basic principles and guidelines.
Here are a few things that you can do to avoid being hit with annoying overdraft fees.
1.) The first thing you can do is to opt out of overdraft fees as is this is often technically a service provided to you in case you need to spend more than you have. The worry with this is that if you use your checkbook and don’t have any funds in your account then your check will bounce, which can also be very costly.
2.) The most basic way of avoiding overdraft fees is by maintaining a cushion or buffer of money in your account so that any small miscalculation of how much money you have available will not cause you to spend more than you have.
3.) Balance your own checkbook! This sounds simple but far too many people never diligently do it. You can monitor your balances and transactions on the internet or over the phone. This will allow you to understand where your money is coming in, where you are spending it, and how much you have available at any specific moment. Don’t rely on the bank to tell you how much you have because there can often be discrepancies in terms of when a check is listed in your account, but has not actually been processed yet. This brings us to the next point.
4.) Utilize direct deposit if you can. If it is available to you to have your paycheck directly deposited in your account, this can ensure that your money immediately enters your account at the same time every week or month, depending on how you are paid.
5.) Check if your bank has a service that will notify you if your account balance drops below a certain level. Although you will already know this if you keep track of your checkbook, a little reminder can always be helpful.
6.) You may also want to look into whether your bank has an overdraft line of credit. Many banks offer a specific line of credit in case you go over your available balance. A finance charge will likely be tied to this line of credit but it will also likely be much less than you might pay in overdraft fees.