I would venture to guess that mine was the last generation that was taught how to balance a checkbook. (I remember a Junior Achievement course in the 8th grade, circa 1995, that provided me the skills to keep my cash flow in the black.) But there’s something to be said for the ease and convenience of mobile banking.
With that ease, however, comes errors — sometimes multiple errors — in the form of overdraft fees because we’ve overspent without knowing it. Keep those unnecessary expenses in check with these ways to avoid overdraft fees.
1. Get Familiar With Your Bank’s Policies
Before you choose a bank, it’s important to familiarize yourself with its policies. Not all banks are alike, after all. Some banks offer overdraft protection, while some offer no-fee transfers from savings to checking. All banks have fine print that you should absolutely read. Going into a financial situation educated will help you cut back on costly mistakes that can be easily avoided.
2. Use Mobile Banking to Track Spending
If you’re one of the few people in America who still use paper checks as a primary source of payment, thus constituting the balancing of a checkbook, I should introduce you to my grandmother — because I think you’ll have lots in common.
But if you prefer to be part of the majority who live in the 21st century, it’s wise to keep track of your finances via mobile banking. Most banks have apps that you can download to your phone to keep track of your finances anytime, anywhere. There are lots of cool features as well, like the ability to transfer between accounts and deposit checks with a few taps and photo image. The latter is a godsend for me as a small business owner, since I no longer have to take time out of my day to deposit checks at a banking brick-and-mortar.
3. Login Daily to Monitor Your Balance and Transactions
What’s the first thing you do when you wake up? When you asked this question in the 1980s, the answer was usually “Go to the bathroom.” Fast-forward 30 years and that answer is altogether different — for me, at least. The first thing I do in the morning is check my social media and bank accounts.
Because before I start my day, I want to make sure that 1,500 strangers still like me, and none of them have robbed me blind. Logging in everyday reminds me to check for erroneous charges, allows me make a mental note on recent charges that may not have posted yet, and informs me on whether I can afford to go out to lunch or I should reign in the spending a bit — all of which help me avoid overdraft fees.
4. Get Alerts When Your Account Dips Below a Certain Threshold
When researching the ins and outs of your banking institution — particularly the checking account services it offers — look for information regarding text or e-mail alerts that notify you when your account dips below a certain threshold. For instance, I have alerts set at $100. If I make transactions that cause my account to go below $100, I’ll receive an alert that serves as a warning to stop spending immediately and build my account back up.
5. Transfer Funds Immediately
If you think you’ve perhaps made more purchases than you have money, transfer those additional funds from your savings to your checking account immediately. I don’t recommend dipping into your savings often (it defeats the purpose), but you should deal with the issue at hand first, which is avoiding overdraft fees. It’s also wise to bank at an institution that offers no-fee transfers when you’re in a bind. Sustaining a hit to avoid a hit is sure to put a kink in your day.
6. Ask to Have Overdraft Fees Waived
Pull a page from my playbook and call your bank if you feel like you deserve a pass on an overdraft fee. If it’s been awhile since you’ve made that mistake, or if you’ve been a loyal customer to the bank for many years, it’s worth the effort. In most cases, the bank will work with you to eliminate the fee on a one-time basis.
7. Opt Out of Overdraft Protection
Overdraft protection is good on one hand because it lessens the fee you pay if you overdraw the account — usually a $10 fee instead of $25 or $35. On the flip side, overdraft protection will allow you to continue to make purchases for which you don’t have the money. This is an especially unfortunate consequence if you’re not aware that you’re overdrawn and you continue making multiple purchases. You’ll rack up a fee for every single transaction, which, by the time they’ve all posted, could become a significant amount.
8. Don’t Use the Credit Option on Your Debit Card
Back in the early days of debit cards, my bank would charge me a nominal fee for each purchase when using it as a debit card, kind of like a competing ATM does. Made absolutely no sense to me, but because of that I started using the credit option when making purchases, which had no fees attached. Nowadays, debit charges are fee-free, so I try to remember to push the purchases through using that method, for one reason: Debit transactions post immediately, whereas credit transaction could take a few days to post. The former will help you stay on top of your financial situation in real-time while the latter could have you overdrawing your account unknowingly.
9. Keep X Amount of Dollars in Your Checking Account at All Times
The best way to avoid overdraft fees is to keep your bank account in the black at all times. To help ensure that you don’t go into the red, choose a self-imposed amount at which you’ll always keep your account — $100, for instance. If you mentally make it standard policy that your account consistently has at least $100 in it, you’ll rarely overdraw, if at all.
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