Overdraft fees make me angry. They are completely unnecessary and avoidable, yet almost everyone (including myself) gets stuck with them, from time to time.
During 2011 Americans paid almost $30 billion in overdrafts fees! Instead of handing over my money to the bank, here’s some ways I avoid paying overdraft fees all together.
1. Cancel Overdraft Protection
“Congratulations, we’ve extended your overdraft protection limit to $1,000. You can avoid the embarrassment and inconvenience of a returned item”. This is a complete nonsense!
The overdraft protection only means that your purchase will go through your bank even if you don’t have the money in your account. But the bank will charge you a $35 fee (0r more) for EACH transaction that overdraws the account.
So basically you are paying to avoid the embarrassment of being denied a purchase. That’s a high price to pay for convenience. Ha! Overdraft protection…that’s a good one.
2. Link to Savings or Loan Accounts
Many banks offer the ability to link your checking account to your savings, line of credit or credit card accounts.
While I’m not a fan of backing up overspending with a loan, it can help you avoid excess fees while teaching you to manage your money better. I asked the Careful Cents Facebook community how they avoid overdraft fees and charges. Here’s a great answer!
3. Set up Minimum Balance Alerts
If you use budgeting software or online banking, you can update your settings to alert you, if your account reaches a minimum balance.
You can choose to get an email or text message, which will alert you to when your balance is getting low. Once I receive an alert I know it’s time to carefully watch my spending, or make a transfer from savings to cover any upcoming, essential purchases.
4. Don’t Rely on the “Check Clearing Time”
This is something I’ve been guilty of in the past. I didn’t have the money in my account – yet – but my deposit would be there in the morning. So I wrote a “hot” check, and expected it to clear by the time my money would be in the bank.
Well, we can’t do that anymore.
With the way mobile payments and electronic transfers are now, there’s barely any time between writing a check and clearing the bank. Many point of sale systems can scan your check and withdraw the money instantly, as if it’s a debit card.
5. Use Cash More Often
For the smaller purchases and other discretionary spending, you might consider using cash instead of your debit or credit card. It’s easy for us to spend money with plastic and to lose track of our account balance. Cash however, is different.
We want to hold onto it a little longer, and once it’s gone, that’s it. There are still methods available to keep track of cash spending on the go. And the upside is, you don’t have to pay fees or worry about your balance.
6. Negotiate a Refund
If you do make an accounting mistake, overdraw your account and get stuck with a fee, there’s still hope. Call up your bank and ask for the Branch Manager. That’s how I saved $362 in fees with one phone call.
Honestly tell the bank your problem and ask for a courtesy refund. Most of the time they will refund all or 90% of the fees. The worst they can do is say no, and it’s definitely worth a try.
Never pay an overdraft fee again!
With all these options available to help avoid paying overdraft fees, there are no more excuses!
Fight for your place to keep more of YOUR money and not hand it over to the bank due to overspending or miscalculations. Arm yourself with these tips, and you will never have to pay an overdraft fee again.