4 ways to avoid record high overdraft fees

Nov

2

4 ways to avoid record high overdraft fees

The average cost of bank overdraft fees has reached an all-time high. Needless to say it’s a crucial time to avoid paying for them.

If you do get hit with one, relying on a phone call to your bank to get it refunded can be hit or miss. It’s unlikely to happen unless you’ve never overdrawn your account before.

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Take matters into your own hands to avoid your next overdraft fee with these helpful tips.

Keep track of your purchases

Practically all financial institutions nowadays offer online banking or have a mobile app for convenience. Take advantage of this free service and check your account balance regularly if not daily.

If you are too busy to check your account balance on a daily basis, see if your bank offers alerts or reminders. They are beneficial because they notify you via text or email when a purchase has been made. Creating an alert that warns you when your balance falls below a certain dollar amount is very helpful. 

Know your “Opt” options

Did you know you have the option to reduce potential overdraft fees when using your debit card?

By contacting your bank and “opting out” of their overdraft policy you can eliminate card related overdraft fees. Keep in mind by opting out the card purchase you make will be denied by the merchant if there isn’t enough money in your account.

This helps avoid the frustration that comes with buying a $4 coffee that leads to a $34 dollar fee.

Setup overdraft transfers

Most banks will allow you to setup an automatic transfer from a second account to help avoid overdraft fees.

How it works is your own money gets moved from your Savings account into your Checking. The transfer only happens when it’s necessary to cover your overdrawn account. 

This service will likely have a small fee that is charged when a transfer takes place. The good news is it should be much lower than an overdraft fee.

This is a good alternative to paying for overdraft fees. The best part is there is little work to be done after setup, because the transfers happen automatically.

Consider a cash reserve

Another possible option to avoid overdraft fees is applying for a small cash reserve or line of credit. This is a specific amount of money that you qualify for similar to a loan that can be used at your discretion.

Typically banks will charge interest on the amount of cash reserve that has been used. Once the cash reserve including interest is paid back it is available to use again.

If the tips we’ve listed don’t seem helpful keep in mind some digital banks offer services like SpotMe, which can also be useful.