Overdraft fees are the worst. Here’s how to avoid them.
There are few worse pieces of news you can get than finding out you’ve got no funds in your account. Worse, that you’ve been charged a fee for going over!
An overdraft fee is one of the fees banks charge to make money as a business. The agreement between you and the bank is simple — they’ll cover you if you go into the negative on your account, but for a price.
Here are 6 simple ways to avoid overdraft fees to make your financial life simpler and easier. If you follow these tips, you won’t have to worry about paying extra when your wallet is tight!
How to avoid overdraft fees
1. Set up Low Balance alerts on your account.
Most banks and financial institutions will offer you the ability to set up a text or e-mail alert when your balance is getting low. This may also be done through that institution’s mobile app as well. Setting up a low balance alert quickly informs you if you’re out shopping that you’re in danger of over-drafting, making you a smarter banker!
2. Link accounts.
If you have multiple bank accounts, even if they’re different types (such as an investment or savings account, or a Home Equity Line of Credit / HELOC), linking your accounts together helps your bank avoid charging you overdraft fees. If you go below 0 on one account, the bank may have the ability to simply take the funds out of a different account automatically.
3. Use a prepaid debit card for services that put holds on your account.
Many retailers and services will place 24-hour holds on your account when making a purchase, such as gas or hotels. These holds can affect your ability to quickly deal with an overdraft and avoid a fee. To be safe, we recommend keeping a loaded prepaid debit card for those expenses if you’re concerned about holds on your account that could affect your overdraft, especially while you’re traveling!
4. Resolve the overdraft quickly to have the fee waived.
Many banks will offer a waiver to an overdraft fee if you get your account balance above $0 within 24 hours. Check with your bank to see what their specific policy is — sometimes the bank could offer several days to resolve the issue.
5. Choose a bank account that doesn’t charge overdraft fees.
Sounds simple! Believe it or not, there are banks that offer overdraft protection that do not charge overdraft fees. Working with a bank like this gives you peace of mind — you’ve got protection fee-free.
6. Opt out of overdraft protection.
This is the riskier decision, as overdraft protection certainly helps smooth things over when you’re writing a check or making a purchase. If you’re the type to always watch your accounts and you know how much you’ve got at all times, then overdraft protection might not be necessary. It could lower the annual cost of your bank account, and ultimately, you’ll feel safe knowing there’s no possible way to be charged the fee.
Live a fee-free life with these simple tips.
With the average overdraft fee across financial institutions being $34, that’s undoubtedly money that you could better spend elsewhere. Avoiding fees like the overdraft fee is key to helping you work towards a debt-free life. Here are more tips on how to live financially healthy.