We have all been there — the dread of receiving a notification from your bank, reminding you that you have overdrafted your checking account. Overdraft fees can be expensive, sometimes as much as $35 each time you overspend. And, unfortunately, these fees can add up quickly.
But, with some helpful tips, that can all end today. Here, learn some helpful tips to financial management and gain insight into the best ways to avoid overdraft fees, potentially saving you hundreds of dollars.
The first tip is to say no to overdraft coverage. Although this may sound counterproductive, the reality is that banks are more likely to profit off of you when you allow them to cover your overdraft costs.
By allowing a bank to cover the overdraft fees you incur, they will temporarily cover the cost for you but eventually, they still charge you the overdraft fee. This means, you will need to pay back the difference for the amount of money you overdrafted, and you will also need to pay back your bank for the overdraft fee.
The point is: Banks may make overdraft coverage or protection sound appealing, as though accepting this coverage is in your best interest. But at the end of the day, they just want to get more money out of you.
That is why it is important to opt out of overdraft coverage options. If you do not have overdraft coverage, your purchase will simply be declined if you do not have enough funds. However, this is still better than having overdraft coverage because you will not be charged an overdraft fee if your card is declined. Additionally, not all cards have fees associated with cards getting declined. But, even if they do, the fees are far less than overdraft fees.
Without overdraft coverage or protection, you may need to take a few extra minutes to transfer money from your savings account to your checking account to make a purchase. But, at least you will not be forced to pay up to $35 in additional fees for miscalculating your bank account.
The good news is, declining overdraft coverage on your account plan is not the only way to avoid overdraft fees.