6 Ways to Never Pay an Overdraft Fee Again

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!

Community Facebook page tips

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. Y

ou 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!

Twitter-lets fix this

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.

Pay Down Debt Faster: Part One - Cut Spending
Making An “Anti-Resolution”
About the author: Carrie Smith is the financial artist and editor behind Careful Cents. She helps creative entrepreneurs make a living with their creations, and reach financial freedom through systems and financial organization. She’s been featured in The Huffington Post, Glamour Magazine, Kiplinger Finance and several other business websites. In May 2013 she quit her full-time accounting job to pursue entrepreneurship and blogging. You can find her on Twitter or Instagram @carefulcents.

Comments on this entry are closed.

  • Justin January 5, 2012, 7:17 am

    I hate when I get over draft charges even though it seldom happens. I always call the bank and tell them to reimburse the overdraft amount and they always do.

    • Carrie Smith January 5, 2012, 9:39 am

      Most banks are pretty flexible about refunding overdraft fees. A lot of people just don’t take the time to make the call. Kudos to you for being proactive!

  • Michelle January 5, 2012, 7:27 am

    I’ve only paid an overdraft fee once, and it was when I was 16. Thankfully I just called up there and they took it off without any hassle.

    • Carrie Smith January 5, 2012, 9:40 am

      Thankfully, it’s been many years since I paid an overdraft fee. Actually, once I started actively using a budget I’ve never gone negative in my account. Hmm, budgets work wonders I guess. Lol

  • Daisy January 5, 2012, 8:16 am

    I use my credit card for almost everything, so overdraft fees only ding me if I don’t have money in my account for my $25 automatic savings – which happens from time to time (maybe once every 6 months or so) and it dings me $5. That drives me crazy. I hate giving money to the banks for silly things like that!

    • Carrie Smith January 5, 2012, 9:41 am

      You make a good point, using a credit card is a good way to keep overdraft fees from happening. I hate giving banks money for silly fees too!

  • kathleen January 6, 2012, 12:03 pm

    OR, use a credit union. They charged me $5 — I feel like the price of a milkshake is worth it to cover my butt.

    • Carrie Smith January 7, 2012, 2:21 pm

      That’s true. Credit unions and community banks have much lower fees and interest rates on loan compared to bigger corporate banks. Mmm milkshakes :)

  • Melissa January 9, 2012, 8:47 pm

    I paid an overdraft fee ONCE and I swore I’ll never do it again. So annoying! Now, I manage this by keeping a minimum balance in my account at all times, which does the double duty of ensuring I never pay bank fees. If I happen to drop below the minimum balance once during the month, I get charged the month’s bank fee, which is $8. Still annoying, but way better than $35 for a momentary slip up. Thankfully, this hasn’t happened yet, though. 

    • Carrie Smith January 10, 2012, 2:05 pm

      The same thing happened to me. I paid a monthly bank fee and an overdraft fee on one of my checking accounts and I freaked. Never again! I got them to refund the charges and close the account. That’s what happens when you have too many accounts and forget about them…the bank incurs sneaky fees.