7 Smart Steps to Avoid Overdraft FeesWe’ve all been there before: An expense takes longer to clear your account than you expected. Then, you pay a bill without realizing. Or, perhaps a family member used the debit card for a purchase without telling you. Either way, before you know it, your account has overdrawn. Now, you’re stuck with a hefty fee. What to do? Sometimes, the bank will waive the overdraft charge for first-timers. Other times, the bank may return payment while the payee charges additional non-sufficient fees (NSF fees). This may also get reported on your credit report as a negative history item.
So, you’ve accidentally overdrawn your bank account and now you’re charged a hefty fee. Here are a few tactics to help you avoid overdraft fees going forward.
Take Control of Your Money to Avoid Overdraft Fees
1. Be the Family BankerMany households are on a tight budget. And these budgets suffer when multiple people make spending decisions. The first step to avoid overdraft fees is appointing one person to monitor the money. This one person will pay monthly bills, set budgets and allowances, and keep your family on a spending plan. It’s also helpful to unplug online accounts and collect debit cards connected to the main spending account in order to prevent unplanned purchases. For example, many shopping accounts save your payment information. Remove this information to help cut down extra spending.
2. Keep a Positive BalanceOne of the easiest ways to avoid overdraft fees is to maintain a positive balance. “Well, duh!” you’re probably thinking. But still, this is one of the hardest things to achieve when you’re living on a tight budget. One way to do this is to set aside an untouchable amount of money in your account. This will pad your spending account from unexpected emergencies or the occasional over-extension of monthly expenses. Remember, most folks have trouble not touching this untouchable money. So, you may use other methods to reserve it, like stashing it away in a joined savings account or secured debit account. No matter the method, find and reserve this small amount of money. It’s the most important step to avoid future overdraft fees.
3. Build a Better BudgetAnother important step to dodging the overdraft is building a working budget. This way, you’ll understand exactly how money is spent in your household. Once an expense budget is created, you can see where the family can save and where to spend less in order to build reserves. Once you have it all planned out on paper, take steps to make it work in life.
Need Help Building a Budget?Here are two helpful resources we’ve put together to help you build a better budget: How to Save Money on a Low Income: 7 Simple Suggestions and 20 Proven Ways to Spend Less Money and Save More
Useful Banking Tools to Prevent Overdraft Fees
4. Overdraft Protection as a Tool, Not a RuleOverdraft protection typically connects your spending account to a savings account in order to cover any overdrafts. If, for example, you swipe your card without enough funds, your bank will instantly transfer money from your savings account to cover the cost. Read more about overdraft protection here. One big benefit to overdraft protection is that you’re less likely to incur NSF fees, related fees from the bank and possibly the payee, and any negative impact to your credit. However, some banks still charge a fee for this occurrence. Also, many banks limit the number of monthly overdraft protection transfers. So, if this happens often, it can eventually cost more than the overdraft you’re trying to avoid! Then, if your backup account doesn’t have enough funds, you’ve got fees on top of fees. Therefore, overdraft protection does not replace good banking habits.
5. To Auto-pay or Not to Auto-PayMost online banking systems allow you to set up recurring payments, called auto-pay. These payments can be monthly, bi-weekly, weekly or any schedule you need to set. Auto-pay is great for recurring bills and helps many users avoid late payments. However, auto-pay works best when an account has a healthy reserve of funds. So, when the budget is tight and that cash cushion doesn’t exist, auto-pay allows scheduled payments to happen without the funds to cover it. By disabling auto-pay, you’ll make sure no payment leaves your account without your control. This could give you the freedom to push a bill payment back a few days until the next payday. After all, it may be better to pay a bill a few days late with the funds to cover it, rather than sending an on-time payment draft without funds.
6. Download the Bank AppA great way to keep an eye on your untouchable funds and account activity is through your mobile banking services. Most banks have mobile apps that allow you to set up notifications. Users can have notifications sent when an account balance falls near or below a set amount. This is a super helpful way to avoid overdraft fees. Also, mobile banking apps let users check balances from anywhere at any time. This helps you to decide on purchases and set expense priorities.
7. Facing The UnavoidableEven with the best planning, sometimes you just cannot avoid overdraft fees from pushing your account over the edge. Overdrafts normally occur at the end of the business day when the bank resolves all transactions. If you know your account has dipped into the negative, you can usually deposit money during that same business day to resolve the overdraft before it happens. However, finding extra money is normally more challenging than beating the overdraft. You might be able to make $100 dollars fast. If not, you can definitely count on Check Into Cash to offer a financial solution.
What About a Payday Loan?Check Into Cash Payday Loans are exactly tailored to small financial speedbumps. Need to reconcile your bank balance to avoid overdraft fees? A Payday Loan could be your money mayday solution. Customers can instantly borrow up to $800, depending on your state, and walk away with cash in hand from one of our stores nearby. Then, pay it back with your next paycheck.
Interested in an Installment Loan?Cushion your account once and for all. An Installment Loan provides more funds, with more time to pay it back. These loans offer lower monthly payments with a larger amount of cash, too. They can be used for an unexpected expense, big-ticket items, and more.
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