If you make purchases more than the balance in your checking account, then the balance could be pushed to negative. Your bank is allowed to charge an overdraft fee on the balance, and not just once if you keep making limitless purchases.
There are ways to save your overdraft fees if the following strategies are taken into consideration:
1. Withdraw from the overdraft coverage
Banks can exercise discretion on whether to cover or reject a transaction made on a negative balance. And what’s best under your control is get to decide either to cover or reject a transaction that would make your balance negative, but you can control one thing. This is to opt-out of an overdraft facility meaning your bank cannot cover a single debit card or ATM transaction or even charge an overdraft fee. Banks have the power to keep an eye on checks and recurring debit transactions without your intervention.
Most overdrafts are created on debit card transactions compared to other instruments of money. When you haven’t opted for overdraft coverage, transactions are declined when a debit card is used over and above. Not all banks/ financial institutions charge fees on declined debit card attempts.
2. Track your account balances regularly
Watch your accounts on a regular basis whether daily or weekly to ensure your balances aren’t too low. Most overdraft fees from debit cards happen with transactions on a high-value purchase. You can easily check your balances either online, using a mobile app, bank phone line or by visiting a bank branch or ATM.
3. Set up reminders/alerts for low balances
Simplify the process of checking your balance by automating it. Seek information on whether your bank offers service to set-up reminders through email/mobile messages so that you’re informed when your account balance goes down below the set-out threshold.
4. Instantly deposit or transfer money if overdraft happens
When a low balance triggers an overdraft, there’s still a chance to save the overdraft fee. How do you do that? Observe if your bank has a daily cutoff time/deadline for transferring money to the account to whenever the balance shifts to negative to avoid unnecessary fees. In fact, even if you miss the deadline, adding money instantly can save you from other fees. Leaving it with a negative balance can snap you with an extended overdraft fee.
5. Link to another account
Your other bank account may have an overdraft protection service available. This means linking the primary account to another account, like a savings or credit account in the same bank. When there’s a shortage of cash in the checking account, you can cover the transaction by making a money transfer from the linked account. Undoubtedly, there’s a fee which is cheaper than overdraft coverage. If you use a credit card or any line of credit, then you surely will have to pay interest on the overdrawn amount. So suit yourself here!
6. Get a prepaid debit card
A prepaid debit card can be a good solution If you continue having trouble monitoring your checking account. These are similar to how debit cards work where you deposit & withdraw money for your spending. These are not linked to your account. Prepaid debit cards don’t have overdraft services but they charge fees for declined transactions.
So, ideally, find a card which doesn’t charge a humongous fee for overdraft transactions.