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Avoiding Overdraft Fees

You can use your debit card for everything from on-line purchases to grocery shopping to utility payments. But, have you ever logged into your checking account only to discover your bank hit you with an overdraft fee? With overdraft fees costing $25 to $35, they can quickly add up. And if you’re already in financial trouble, overdraft fees can make the situation worse. By working with your bank and planning ahead, you can avoid these fees and prevent the needless draining your hard-earned money.

Author: Lori Anderson
Date: Feb 14, 2013 - 12:54:00 PM

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You can use your debit card for everything from on-line purchases to grocery shopping to utility payments. But, have you ever logged into your checking account only to discover your bank hit you with an overdraft fee? With overdraft fees costing $25 to $35, they can quickly add up. And if you’re already in financial trouble, overdraft fees can make the situation worse. However, there is no reason you have to suffer from overdraft fees. By working with your bank and planning ahead, you can avoid these fees and prevent the needless draining your hard-earned money.

Check your local bank policies
Generally, when you set-up an account with a bank, you are offered the service of overdraft protection. If you agree to this service you gain the "benefit" of not having to worry about transactions being declined at a point of sale due to insufficient funds in your account. When there is not enough money to pay for a debit from your saving or checking account the bank allows the transaction, loans you the amount required to cover the amount, and then charges a fee to your account for the convenience. Sounds great, but remember, you are left with a hefty negative balance on your account which is the sum of the money the bank paid in the overdraft and the fee for that payment.

This service of overdraft protection and how it works can vary from bank to bank. If a type of overdraft protection is not specified, check with your bank to see if they would decline the transaction instead of paying the overdraft. If the transaction is declined you will avoid the specific overdraft fee, however, you might receive a fee for the decline from both your bank and the company that is being declined. It's possible that the fee for the decline may be more than the bank’s overdraft fee, so spend carefully!

While the service of overdraft protection can be helpful for emergencies, if you don't track your spending wisely and tend to often get overdraft fees, you run the risk of depleting your savings account or pushing your credit card to its limit. If this is your case, consider some of the following strategies.

Keep track of your expenses with your check register
Maybe this sounds obvious, however, in a world where you can pay for just about anything with you debit card, it’s easy to lose track of how much you have spent. It is always a good practice to take your check register with you and record your purchases. By making this a habit, you will have the security of always knowing how much money is left in your personal checking account.

Deduct the automatic drafts to your checking account in your check register before you make any purchases
It is easy to forget payments that are automatically deducted from your checking account. These deductions often include payments for insurance, utilities, and a host of other services, such as an online movie streaming service. Take the time at the beginning of the month or your pay period to record the automatic deductions from your account in your check register. That way, you won’t end up with any surprises.

If you cannot remember to balance your checkbook, pay with cash
We live in a hectic world, and let's be honest; at times it's easy to forget to balance your checkbook. If you absolutely cannot remember to record your debit card or checking purchases, consider not using them at all. Check and debit cards are supposed to be a convenience. However, if they have become a burden to use, there is no reason to add more stress to your life. Consider making all your purchases with cash. If you have to mail a payment, you can purchase money orders.

Get help from your bank
Your local Minnesota bank might have different types of checking and savings accounts that will work for you better and provide more services than the one you have now. If your overdraft fees seem exorbitant, you can consider looking for a bank with less expensive fees. However, if you are getting a lot of overdraft fees consider seeing a financial or credit counselor who can help you make a budget. It is not necessary to allow overdraft fees to drain away your hard-earned money. With a little planning, you can make them a thing of the past.

Sterling State Bank in Minnesota provides personal banking services including checking accounts, saving accounts and debit cards to meet all your financial needs.

View all articles by Lori Anderson

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