If you’ve ever had a checking account, then you’re likely familiar with overdraft fees. Overdraft fees can be incredibly costly, and it’s important to know how to avoid them. In this post, we’ll discuss what overdraft fees are, how to avoid them, and what to do if you accidentally go into overdraft. We’ll also provide some tips for keeping your checking account in good standing!
What Are Overdraft Fees?
Overdraft fees occur when you don’t have enough money in your account to cover a transaction. If you try to make a purchase and there isn’t enough money to cover it, your bank may charge you an overdraft fee. Overdraft fees can vary depending on the bank, but they’re typically around $35 per transaction.
How Does It work?
Overdraft fees are typically charged when you spend more money than you have in your account, causing your balance to become negative.
- Depending on your bank, you may be charged a fee for each purchase that overdraws your account, or you may be charged a flat fee for the day your account is overdrawn.
- In addition, some banks may also charge interest on the amount of money you have borrowed.
- Although there are no federal laws regulating overdraft fees, many states have enacted their regulations. For example, some states limit the number of fees that can be charged per day, while others require banks to obtain customers’ approval before enrolling them in an overdraft protection program.
How To Avoid Overdraft Fees?
Overdraft fees can quickly add up, making it difficult to recover from a mistake. Here are a few tips to help you avoid overdraft fees:
Check Your Account Balance Regularly
Overdraft fees can be costly and add up quickly, so it’s important to keep an eye on your account balance. One way to do this is to check your balance regularly. You can typically do this online or by phone. This will help you to avoid any surprises and keep your finances on track. Additionally, many banks offer mobile apps that allow you to check your balance on the go. This can be a convenient way to stay on top of your finances and avoid overdraft fees.
Use A Budgeting App Or Spreadsheet
A budgeting app or spreadsheet can help you to avoid overspending and incurring unnecessary fees. By tracking your income and expenditure, you can ensure that you always have enough money to cover your bills. This will help you to stay on top of your finances and avoid any unexpected charges. It can help you to identify areas where you could save money. By understanding your spending patterns, you can make adjustments to ensure that you are only spending money on essential items.
Set Up Alerts
Many banks offer alerts that will notify you if your account balance drops below a certain amount. This way, you can transfer funds into your checking account before you make a purchase. This can help you avoid accidentally spending more than you have.
Overdraft Protection
One way to avoid costly Overdraft Fees is to sign up for Overdraft Protection with your financial institution. Overdraft Protection links your checking account to another account, such as a savings account, credit card, or line of credit. This way, if there isn’t enough money in your checking account to cover a purchase, the funds will be transferred automatically from the linked account.
Keep Track Of Recurring Payments
One of the easiest ways to avoid overdraft fees is to keep track of your recurring payments. This includes things like utility bills, credit card payments, and other regular expenses. By knowing when these payments are due, you can make sure that there is always enough money in your account to cover them. You can also set up reminders for yourself so that you don’t forget to make a payment.
How To Keep Your Checking Account In Good Standing
Maintaining a healthy checking account is important for many reasons. It can help you avoid fees, maintain a good credit score, and keep your finances in order. Here are some tips for keeping your checking account in good standing:
Know Your Balance
Keep track of your account balance so that you never overdraw. You can do this by logging into your online banking portal or tracking your spending with a budgeting app.
Make Regular Deposits
Try to deposit money into your account at least once a week, even if it’s just a small amount. This will help you avoid falling behind on bills or other payments.
Use Direct Deposit
If your employer offers direct deposit, sign up for it! This will help ensure that you always have money in your account to cover expenses.
Keep An Emergency Fund
Having a cushion of cash in your checking account can help you cover unexpected costs, like a car repair or medical bill. Aim to keep at least $500 in your account at all times.
Avoid Unnecessary Fees
Be mindful of fees, like monthly maintenance charges or ATM fees. Many banks offer free checking accounts with no monthly fees, so shop around to find the best option for you.
What To Do If You Accidentally Go Into Overdraft?
If you do accidentally go into overdraft, don’t panic! You can typically bring your account back to good standing by making a deposit as soon as possible. There are a few steps you can take to minimize the damage.
- You should call your bank and explain the situation. They may be willing to waive the overdraft fee or extend your grace period.
- Make a deposit as soon as possible to bring your account back into good standing.
- You can also opt-out of overdraft protection altogether. This means that if you don’t have enough money in your account to cover a purchase, the transaction will simply be declined. While this can be inconvenient, it can also help you avoid costly fees.
To opt-out of Overdraft Protection, contact your bank or financial institution. They will typically have a form that you can fill out and submit. Once your request has been processed, you will no longer be able to overdraw your account.
Conclusion
Although overdraft fees can be costly and cause a lot of stress, following these tips can help you avoid them altogether. Keep track of your account balance, make regular deposits, and opt-out of overdraft protection to keep your checking account in good standing. These simple steps will help you stay on top of your finances and protect yourself from unnecessary charges.