Handling Money: Avoiding Overdraft Fees

Whether school is in session or you’re on break, it’s difficult to find time to monitor your bank account. However, if you don’t balance your checkbook or check your balance online, you might incur overdraft fees by spending more money than you have in your account. Try these strategies to avoid financial penalties and other complications associated with overdrafts.

Set an Online Alert

Modern banks have adapted to technology just like businesses in many other industries. If you have access to online banking, you can probably set account alerts. You’ll give your bank a minimum balance, such as $50, and you’ll receive an email or text message if your balance dips below that threshold.

Account alerts can stop you from spending money you don’t have. As soon as you receive a notification, you can either put the kibosh on purchases or transfer money from another source into your bank account. You’ll avoid overdraft fees and perhaps develop more responsible spending habits.

Check Your Bank Account Once Per Day

If you don’t want to balance your checkbook manually, set up online access. Check your balance at least once per day. If you choose a specific time, such as first thing in the morning when you wake up, you’ll create a long-term habit. It will become second nature to check up on your balance, which will enable you to keep a closer eye on your finances.

Add a Backup Account

Most banks allow you to create a backup account for your checking account. You can use a savings account as long as you have money stashed in it, or you can link a credit card. If you accidentally spend more than the balance, the bank will automatically pull funds from the backup. Some banks charge for each transfer, though, so it should serve as your last resort.

Ask for a Waiver

If you accidentally slip up, don’t panic. Just about everyone experiences an overdraft fee at least once in his or her lifetime, so you don’t have to beat yourself up. If this is your first overdraft instance this year, call or visit your bank. Many institutions will waive single overdraft fees as a courtesy to keep customers happy.

You might also have an opportunity to negotiate for lower fees if you have several in a row. For instance, the bank might drop $10 or $20 off what you owe to make the hit more manageable.

Pay Fees Fast

Don’t let a negative balance chew away at your bank account. The financial institution will add new fees each week or so, which means you’ll continue to bleed money. Instead, pay off the fees right away, then use some of the tips above to manage your money more carefully. If all else fails, ask your bank to eliminate overdraft protection for your account. That way, if you try to spend more than you have, the bank will simply decline the charge.

Overdraft fees often plague college students who don’t always know how much they have in the bank. Recognizing the issue and taking steps to resolve it will help you create positive financial habits.

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