When budgeting for the month, consumers have the goal of managing their money well enough to ensure all expenses can be covered. However, unexpected costs can arise, which may make reaching this goal difficult.
Consumers who find themselves in such financial troubles, might end up facing overdraft fees with their bank, but there are easy ways to avoid this costly expense.
1. Don’t sign up for overdraft protection
Most banks offer account holders the benefit of overdraft coverage. What this does is ensure that a debit card won’t be declined if a purchase is made that would overdraw the account.
While some may take advantage of this option to save themselves the embarrassment of their card being declined, it is probably best to opt out, as overdrawing a bank account comes with expensive fees. By choosing not to utilize coverage, consumers could save money and ensure overdraft fees are never incurred.
2. Sign up for low balance alerts
Checking a bank account balance everyday to ensure there is enough money to make purchases can be an annoying task, but some banks offer options that help people avoid this. Both email and text alerts can be set up to notify account holders whenever their balance is getting low. Generally, these can be customized to inform consumers when their balance passes a certain threshold. Additionally, alerts can be received when an overdraft occurs, which might provide enough time to deposit money and avoid a fee.
3. Link checking and savings accounts
Another option available to help prevent overdraft fees is to link checking and savings accounts. Of course, there will need to be funds available in the savings account for this to work, but it can be one of the simplest ways to avoid overdrafting. To make sure this works, account holders will have to give the bank permission to tap into the savings if the checking account is overdrawn. Additionally, credit cards can be linked as well, but it is important not to build up too much debt using this method if it is the option chosen.
4. Always keep an account cushion
If possible, one of the easiest ways to avoid overdraft fees is to have a monetary cushion in checking accounts. While not everyone will be able to do this, those who have the extra money available should seriously consider it, as the costs of overdrawing can add up quickly.