Estimated Monthly Savings: $40
When it comes to things that can kill a budget and destroy months of careful financial planning, there’s no doubt that overdraft fees top this list. How deep this rabbit hole actually goes depends on your bank and the type of account you have, but the fees can pile up in the blink of an eye.
Some banks will deny the charge if you don’t enough money, and then charge you an overdraft fee. This itself is bad, it often puts you in the negative and takes whatever money you had left, and this can happen even if you’re only a few cents short. Then, there are other banks that will PAY the charge even though you’re short, and then charge you the overdraft fee. It’s then common in that situation for them to also charge you a Non-Sufficient Funds fee, which just doubles the amount you’re in the hole. If you don’t notice right away that you’ve gone in the red and you have automatic payments or other debits coming through, a single transaction can easily rack up hundreds of dollars in fees in a matter of a couple of days or a week.
There ARE ways you can avoid these fees, with just a little foresight and careful planning.
Monitor your balance like a hawk.
Keeping an extremely close eye on your running balance is one of the best ways to avoid unplanned fees. Combine a tight budget, recording every purchase and debit, and a running schedule of all of your bills and essential charges together to create a master list you can use to check and make sure your spending and balance are on track.
Consider turning off automatic payments.
While it’s true that setting up automatic payments with some companies can help you avoid certain ‘payment fees’, if these charges are coming out at inconvenient times or you’ve forgotten about them — or didn’t know about them — they can end up costing you more in the long run. Turning off, or not opting into automatic debits to begin with, can help you keep a tighter rein on your accounts, and allow you to control your cash flow. This hands-on approach also allow you to potentially catch conflicts and shortages before they happen.
The same does NOT apply to direct depositing of money, though. It’s actually advisable to go with direct deposit in all possible cases when it comes to money going into your account — these will often post long before checks can clear, meaning you have money in your account that much sooner.
Avoid opting in to overdraft protection, and look for other options.
Some banks will offer you an ‘overdraft protection’ courtesy, option, or ‘line of credit’, depending on your bank. More often than not, these options are still costly — there’s no guarantee they won’t still charge you some kind of overdraft fee, and there’s also the potential for monthly costs for such a service.
Creating a ‘buffer’ in your account is one alternative — leaving a small amount in your account that you don’t include in your balance, anywhere from say $20 to $100. This can help cover small overages. Another option would be to link your account to another one — a savings account, for instance — and set up the option to automatically pull funds to cover overages, if possible. Setting up alerts that tell you when you’ve reached a minimum balance is another useful tool.
Don’t let those fees get the best of you!