How to Avoid Overdraft Charges

Debit cards and online banking have it easier to spend money and they’ve also made it easier to overdraft your bank account. Back in the days of cash and checks, you could easily figure out your bank account balance and how much you were able to spend. All you had to do was track your balance in your checkbook register. Add up the amount of checks you’d written and subtract it from your last known balance. Viola!

After you’ve swiped your check card several times throughout the day, paid some bills online, and withdrawn cash from the ATM, keeping up with your account balance is hard. Then, factor in way charges hit your account at different times and convenience becomes an ingredient in a recipe for disaster.

Many banks won’t stop you from using your check card when it could overdraft your account. In fact, some purposely process your transactions in a way that makes you overdraft. You can count on paying that fee for every item that posts to your negative balance. If you leave your account overdrawn for too long and you’ll start incurring daily fees for the negative balance.

Overdrafts weren’t always handled this way. A few years ago, banks would just reverse transaction and charge you a non-sufficient funds fee. After that, the merchant could present the transaction for payment a second time. If you still didn’t have the funds, you’d get hit with another non-sufficient funds fee. On top of all that, you’d have to pay the merchant directly for the transaction plus a returned check fee. You could end up paying $90 on a $10 transaction.

You can avoid overdraft fees by keeping up with your account balance and the purchases you make. Link your checking account to a savings account or line of credit that will fund any charges that exceed your balance. If you’ve already incurred some overdraft charges, talk to your bank’s customer service to find out if you can have them refunded.