It happens to the best of us – a charge clears earlier than we thought while payday is a couple of days away and bam! – you get hit with an overdraft fee. If you’re trying to work on your finances this can be super discouraging. Earlier this week our checking account dipped below our preferred minimum and we could have gotten hit with a fee if one more charged cleared. Eek! But take heart! There are ways to avoid getting hit with these annoying fees.
Set up alerts to notify you when your balance dips
This is the main tool I use to make sure I have enough in my account to cover the bills. I’ve set up an alert on my checking account to let me know when my checking account goes below a certain amount. For me I’ve set the alert at about the equivalent of a month’s rent, but you can choose another amount such as another large bill.
Spread out your bills and keep track of withdrawal dates
Another way to avoid fees is to spread out your payments across the month so that a lot of money isn’t being withdrawn at the same time. In the same vein, keep track of your billing dates so you aren’t surprised at the drop of your bank account. For example, I use Google calendar to keep track of the transfer dates and amounts for my sinking funds so I’m aware of upcoming deductions.
Keep a cushion in your checking account
Padding your checking account with extra monies can also protect against charges sneaking up on you. How to you create a cushion? First, you have to make sure that you’re not spending more than you bring in. Look at the low hanging fruit like coffee and lunches out. Aim to have at least an extra $100 cushion in your checking account. The key is pretend that the money isn’t even there so you aren’t tempted to spend it.
Link a savings account to your checking for quick transfers
Assuming you followed suggestion #1, once you noticed that your balance has dipped below the desired minimum you can quickly transfer money from your savings account, thereby creating your own overdraft protection. This tip works best if your savings account is with the same bank. For example if your checking account is with Bank of America but your savings account is with Ally it might take a couple of business days to transfer your money. Having a saving account at the same bank allows you to do an instant transfer.
When in doubt, ask for mercy
Sometimes despite our best efforts we still manage to get hit with a fee. If this is your first offense, call your bank right away and ask if the fee can be waived. Most financial institutions are willing to waive the fee if this is your first infraction or your last offense was more than 12 months ago.
Do you have other tricks to avoid overdraft fees? Leave a comment below.