How to Avoid Overdraft Fees

It happens. We understand there are temporary money pitfalls that are less than desirable. Yet, when you overdraft, or spend more money than what’s available in your checking account, you might face fees. When you are between a rock and hard place, here’s how to avoid pesky overdraft fees.

Monitor Account Balances

First, be aware of your accounts and the amounts in them. With digital and online banking tools, it is easier than ever to know how much is in your bank account with a couple of clicks on your phone or desktop. If you notice your checking account is starting to get low, reconsider any nonessential purchases. If it can wait until payday, wait!

One way to force yourself to be aware of your account balances is by purposefully keeping a low amount in your checking account. That way you are likely to check your account frequently to ensure there is enough to make your purchase. If a large chunk of money is in your checking account at the beginning of the month, you may be surprised by how quickly you can spend it. And if you don’t keep an eye on it, you can keep swiping away until you are accidentally in the red.

Another way is when you are checking your accounts, make sure you are looking at the available balance. Not every transaction will be deducted from your account immediately. Some charges might be considered “pending”, or scheduled to be automatically deducted, or there might be checks in the mail waiting to be cashed. Whatever the case, the first step to avoiding overdraft fees is to have a keen sense of where you stand financially.

Money Tip! If your financial institution offers email or text alerts for when your account drops below a certain amount, sign up! This is a great way to take care of an overdraft before it happens and be aware of how much is in your checking account.

Link To Savings Account

Your checking account may not be your only source of money. If you find yourself obtaining more and more overdraft fees, consider linking your checking account to your savings account. When you overdraft, instead of being charged a fee, the money will be pulled from your savings account to cover the purchase. As long as your savings account has sufficient funds, then you are good to go. This saves you from "checkout line embarrassment" and reduces the amount (and cost) of overdraft fees.

Another way to continue a purchase without overdraft fees is by putting the charge on a credit card. A credit card is a line of credit that you are pre-approved for from a financial institution. But keep in mind that whatever charges you put on a credit card will accrue interest if it is not paid off at the end of the month.

Whatever purchases you put on a credit card or pull from your savings, ensure you can replenish the money from these accounts at a later date (sooner than later!). The last thing you want to do is continue a negative balance and sustain more fees. If you do overdraft, always try to bring your account to a positive balance as soon as possible.