4 easy ways to avoid overdraft fees


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Overdraft fees can be a huge and unnecessary expense. Unfortunately, you incur overdraft fees when you don’t have enough money in the bank but you still try to use your debit card or withdraw money from your account. Your actions may cause your account balance to drop below $0, triggering these charges and potentially other penalties.

It can be difficult to avoid overdraft fees if you’re short on cash. And, unfortunately, being hit with that extra cost can only make your situation worse if you didn’t already have enough money. The good news is that these four tips can help ensure that you never try to spend more money with your bank than you have.

1. Keep a financial cushion in your checking account

Overdraft fees are only charged if you drop your balance below $0. So if you keep a lot of extra money in your account, this can’t happen to you. If it is possible for you to do so depending on your financial situation, try to put an extra $500 or $1,000 in your account that you will never touch. This money will always be there in case you accidentally try to withdraw too much money from your bank account.

2. Use an app that tracks your balance

Not everyone has a lot of extra money to keep in their bank account. If you don’t want to tie up a ton of money by keeping a cushion in your account, you’ll need to track your spending more carefully. An app can help you do that.

You can use your bank’s app to monitor exactly how much is left in your account, and you can often choose to be alerted when your balance drops to a dangerously low level. Other third-party fund management apps such as Mint can also be programmed to provide a warning when your account balance has reached a preset limit.

3. Do most of your spending with a credit card

Using your debit card can often increase the risk of an overdraft because you might accidentally forget some charge or check you wrote and use the debit card for a purchase you can’t cover.

If you instead use your credit card to charge for purchases, you won’t end up withdrawing money from your bank account that you don’t have. You can control when you pay off your card balance and make sure you have the money in your bank account before making a credit card payment.

The risk of this approach is that if you have a credit card balance, you could end up owing a lot of interest. Over time, interest charges could end up costing more than overdraft charges. But if you’re on a budget and track spending on your credit card, you can make sure you’re not spending more than you can afford. You can then pay off your balance at a strategic time, such as when you receive a paycheck, so you’ll be sure you have the money in the bank to cover it.

4. Choose a bank that won’t charge overdraft fees

Finally, the easiest and most foolproof way to avoid overdraft fees is to choose a bank that simply doesn’t charge them. There are many big banks that have eliminated these fees, and if you select one, you won’t have to worry that a single mistake could cost you a ton of money.

Any of these four tips can help you avoid overdraft fees, but choosing the right bank may be the best and easiest approach, so it’s definitely worth thinking about.

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