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8 Ways to Avoid Overdraft Fees in the US

Published on December 6, 2013 3:10 PM EST

Most of us want to save as much money as we can to live a more comfortable life in the future. However, this endeavor isn’t always an easy one especially for those who are stretched thin and barely getting by. What’s worse is that when we spend more money than we have for our basic needs, our banks could charge us with one overdraft fee after another until we incur a huge pile of debt.

Banks make billions of dollars each year from overdraft fees alone. Research shows that banks hit an all-time high last year as consumers coughed up a whopping $34.3 billion in overdraft fees.


Unfortunately, most people who incur these fees are often unaware that they can easily avoid them. Let’s take a look at some of the strategies for avoiding overdraft fees.

  1. Opt out of overdraft coverage

The easiest way to avoid overdraft fees is to opt out of an overdraft protection program.  Federal law requires banks to obtain your affirmative consent before charging overdraft fees for debit card purchases or ATM withdrawals. This means you have the power to decide if you want an overdraft coverage.

Of course, without it, your transactions will be declined when you don’t have enough money in your account. Additionally, you may still incur overdraft fees when it comes to checks and some electronic transactions.

  1. Monitor your account balances regularly

Never lose track of your current financial situation. You can budget your spending and monitor your accounts regularly to control your finances.

It’s so much easier for you to monitor your account balances today. You can even do it from the comfort of your home. Download your bank’s app or access their official website to start monitoring your finances. Keep track of your account balances and make sure they aren’t too low.

  1. Get notified when you have low balances

Find out if your bank can send you automatic notifications when your balance drops below a certain threshold. If you keep on forgetting to check your accounts regularly, you might want to subscribe to your bank’s notification system. They will either send you an email or a mobile text alert when your balances have gotten too low.

  1. Download a cash advance app

Cash advance apps are an excellent solution for your financial troubles. Whenever an unexpected expense leaves you short at the end of the month, you can use apps such as Earnin and Dave. You can loan money from these applications instead of incurring high penalties.

You can borrow enough money to get you through to your next payday. This way, you can meet minimum daily expenses without having to incur costly fees.

  1. Link your checking account to a savings or credit account

Think about signing up for an overdraft protection transfer service. It lets you link your checking account to a savings or a credit account at the same bank. If you have an insufficient balance, your linked account will cover the shortage.

You might have to pay a fee for this, but it will be a cheaper alternative to overdraft fees. Remember that when you link a credit account, you have to pay it back. It won’t be automatically repaid from new deposits into your checking account. Most likely, you need to pay an interest and a transfer fee.

  1. Deposit money into your account when an overdraft occurs

Ask your bank if they have a deadline for correcting a negative balance on the same day. You might be able to avoid overdraft coverage fees if you transfer enough money into your account on the same day you acquired a negative balance.

Transfer money into your account as soon as you can if you can’t beat the daily cutoff. The sooner you do this the better it is for your credit history and bank fees. Leaving your balance negative could lead to more overdraft fees. Since average overdraft fee is $32.75, you can easily incur over $90 in fees when you make three purchases.

  1. Get a prepaid debit card

Open a prepaid debit card if you keep on having trouble with your checking account. Much like debit cards, these prepaid accounts let you deposit, withdraw, and spend your money. They just aren’t linked to a checking account. They don’t usually come with overdraft services, but they might charge you for declined transactions.

  1. Change banks

Have the courage to switch banks when you’re certain that your current bank is unable to meet your needs or when they have costly overdraft fees. Look up the banks within your area and inquire about their services.

Protect your family’s finances by being proactive about managing them. Try out these methods, and you should incur fewer overdraft fees over time. You might even be able to avoid these fees for the rest of your life.

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