Not long ago, I got a distressing note from my bank indicating negative balance in my account entrance, which invariably led to the familiar overdraft fee. Has anyone else ever found themselves in such a predicament? It’s surprising how this happens, even when we think we’ve got our finances under control. The Consumer Financial Protection Bureau reports that Americans shell out a staggering $17 billion in overdraft and insufficient funds fees every year. Let’s look at five strategies to dodge those pesky overdraft charges.
OVERDRAFT FEES EXPLAINED
An overdraft fee gets levied when your bank permits you to withdraw more money than what’s deposited in your checking account, either through an ATM, debit card or cheque. It’s essentially a fee that your bank charges for covering you in times of shortfall. Some banks even institute an ensuing daily charge between $2 to $5 until your balance returns to being positive.
None-the-less, every bank has its own unique fee structure. Here’s what you’ll be charged at some top U.S. banks:
– Chase: $34, maximum of $102 per day
– Bank of America: $35, maximum of $140 per day
– Citibank: $34, maximum of $136 per day
– Wells Fargo: $35, maximum of $105 per day
– HSBC: $35, maximum of $105 per day
Nonetheless, these fees are often avoidable with a few savvy moves. Understanding how to sidestep overdraft fees can save you substantial money over time.
ELUDING OVERDRAFT FEES
1. SET UP ONLINE ALERTS
Numerous banks offer online notifications that inform you whenever your checking account balance falls below a predefined limit, say $50 or $100. Recurrently checking your balance using different platforms like online banking, mobile apps, phone calls, ATMs, or personal bank visits can help you manage your finances better in the long run.
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2. GO CASH-ONLY
Only shelling out the cash you physically possess is an effective method of dodging overdraft fees. Since you can’t spend more cash than what is in your wallet, not only does this save you the hassle of reconciling your checkbook but it can also help you monitor your spending.
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3. DECLINE OVERDRAFT PROTECTION
Though overdraft protection sounds useful initially, consider what it means: multiple transactions covered by your bank in exchange for a fee per transaction. Fortunately, you can decline this. You have the power to request your bank not to permit going over your account limit, leading to declined transactions when your balance runs low.
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4. ADOPT BUDGETING
Establishing a budget helps prevent overdrawing from your account. A well-devised budget eliminates worry about your financial state. It’s recommended to have a $1,000 buffer for unexpected expenses.
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5. MAINTAIN A BUFFER BALANCE
Keep some extra money in your account to cover any unforeseen or forgotten expenses. Remember those recurring subscription charges or monthly payments that are easy to overlook? They can quickly push you into overdraft. Therefore, it’s wise to maintain a buffer in your account over your usual monthly expenses.
If you find yourself facing an overdraft due to an isolated error, don’t shy away from contacting your bank and requesting them to waive the fee. Many banks will oblige, especially if you’re generally conscientious with your finances.
THE TAKEAWAY
We all want to preserve our hard-earned money without losing it to overdraft fees. With the strategies outlined above, you can proactively avoid these unnecessary charges. Regularly reviewing your financial status and spending habits alongside effective budgeting will help prevent landing in the red.
Act prudently, like seeking banks without overdraft fees, setting up alerts, and using cash, to take full monetary control. Having encountered an overdraft fee myself, I took the sting as a learning experience towards making more informed financial decisions.
What tricks do you use to steer clear of overdraft fees?
