A few years ago, I put enough money in my checking account to cover my monthly gym dues. Of course, I didn’t remember that they were going to also take out an annual membership fee (which they never reminded me by the way) – which is why reading the fine print is important.
But, never mind that.
Let’s just say I didn’t have the money in my account to cover it.
And of course, there was a lot of bouncing going on.
This $39 fee ended up costing me close to $300 after everything else was done with.
And yes, it was 100% my fault.
Let me explain that first of all, I didn’t use this account very much so I only kept what I needed in there. I also didn’t realize that the bank would pay for bank drafts when there was no money in my account and no direct deposit. I thought they would decline the charges if there wasn’t enough money in my account.
That thinking was foolish on my part. And like I always say, “Once you know better, you’ll do better”.
Now I’m not here to tell you not to have automatic deductions because they can be helpful, but I’m saying that overdraft fees can be a big issue when you don’t manage your money well.
Disorganization will wreak havoc on your finances.
And bank fees can also wreak havoc on your finances by putting you further into debt. If you fail to pay your bank you can risk forfeiture of your account and being reported to ChexSystems. Without an account, you will have to go a check cashing joint, which costs even more money.
You see the cycle?
And don’t think the big banks will help you. Overdraft and bank fees are big business.
Overall, America’s banks took in an estimated $32.5 billion in overdraft fees in 2015 and $42.3 billion in total fees.
Your financial mishaps are a bank’s dream. And one of the reasons I stress staying on top of your finances – because being broke can be expensive.
To keep your bank account and to keep your personal finances healthy, you need to avoid bank fees, especially overdraft fees by any means necessary.
How To Avoid Overdraft Fees
Overdrafting your account can costs you hundreds and even thousands of dollars each year, if you’re not careful. Banks won’t put a stop to them because they are making money hand over fist.
They are literally making money off of your foolishness!
Here are few ways to avoid overdraft charges and save money on bank fees.
– Check your balances daily. I log into my account everyday (sometimes multiple times a day). Not only do I not want surprises at the register, but I also want to be aware of any charges I didn’t make to my account.
– Set up balance alerts. Most accounts allow you to set up alerts to give you a heads up for low balances, charges, and automatic debits. Set it up to receive alerts or text messages.
– Link accounts. To avoid overdraft fees, link your checking and savings account. That way, if your checking account is about to be overdrawn, the bank can transfer money from your savings account to cover it.
– Opt out of overdraft coverage. This is absolutely not necessary if you simply link your accounts together. Yes, having overdraft coverage can help you to avoid an overdraft fee, however, you’ll be charged for using the service. It’s not worth it.
– Deposit money quickly. Depending on your bank’s scheduling, you may be able to avoid an overdraft fee if you deposit money in your account before the cut-off time. Another reason why you should have those balance alerts.
– Use a prepaid debit card. Some people turn their noses up at prepaid debit cards, but I love them. A prepaid debit card can be used just like your regular debit card, and are great for people who don’t like traditional bank accounts (or can’t get one).
Debit card transactions cause more overdrafts than any other transaction type, according to a 2014 report from the Consumer Financial Protection Bureau. With a prepaid debit card, your card will be declined if you try to make a purchase more than your balance. This is great – no need to worry about overdrafts. It’s also a good way to keep tabs of your spending.
Now, overdraft charges are not the only fees you can face while banking.
Save Money on Bank Fees
Going to out-of-network ATMs frequently or using accounts not best suited for your financial situation, can cost you money as well.
Other fees to avoid from your bank include ATM and usage fees.
To avoid ATM fees, plan your withdrawals and only use your bank’s ATMs or those within their network. The average out-of-network ATM fee is $4.35 per transaction, according to Bankrate.
You avoid paying a fee for the ATM and the fee to your bank (why should you pay to withdraw your own money?).
Second, if you have an account that charges you a service fee every month – you need to find an account that is better suited for your situation or simply switch banks.
There are too many free checking accounts out there for you to have to pay each month. Oftentimes, banks will charge you a fee if you don’t keep a minimum balance, don’t have direct deposit, or don’t make a certain amount transactions during the month.
Either do what you need to do to avoid a fee or otherwise get rid of the account altogether.
Do you struggle with bank fees? If so, hopefully, these tips will help you to save money while banking.
- 50 Super Easy Ways to Save Money
- 7 Fast Ways to Save for a Downpayment for a House
- What to Do When You’re Dead Broke and Need Money Now