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What Are Overdraft Fees?

college students young adults

Overdraft fees are charges imposed by banks when a customer spends more money than is available in their account, resulting in a negative balance. Basically, the banks know most people aren't good at monitoring their Money.  So you can go over, for a fee, which is great for them. This is why you should check your checking account balance every other day.

Cost of Overdrafts

The cost of overdraft fees can vary from bank to bank, but it's not uncommon for these charges to range from $30 to $40 per occurrence. If multiple transactions occur while an account is in overdraft, the fees can quickly accumulate, turning a minor financial setback into a major financial headache.

Opting-In

Many banks offer overdraft protection programs, allowing customers to link their checking accounts to savings accounts, credit cards, or lines of credit. Sometimes you might not even realize you have this service.

Monitor Your Account

The first line of defense against overdraft fees is proactive account monitoring. Regularly check your account balance to stay aware of your financial situation. With the advent of mobile banking apps, it's easier than ever to keep a close eye on your transactions and account balance right from your phone. You should do this every other day! Be aware of checks that have not cleared or automatic bills that have not come in. 

Set Up Alerts

Take advantage of alert features provided by your bank. Set up notifications for low balances or when transactions exceed a certain threshold. These alerts can serve as early warnings, allowing you to take corrective action before overdraft fees are incurred. Set up an Alert for when your Balance goes under $100.

Opt-Out

If you're concerned about the potential costs associated with overdraft protection, you have the option to opt-out. While this means that transactions exceeding your account balance may be declined, it also ensures that you won't incur overdraft fees. Just call the bank!  Very easy.

Stop Using Them!

If you are tired of overdraft fees and if you are ready to really start saving money, then you need to invest time in managing your money and having a sound spending plan. A spending plan will help you save money every month and also build wealth for your future. It is easy and I can walk you through it step by step. Learn More!

Other Tips

Overdraft fees, insufficient fund fees, and late payments. These are all indicators you are not planning ahead. Set up a budget and see where you are getting hit. Are you getting automatically billed for your cell phone? This is great for them, but getting you into trouble. Consider changing automatic payments. Are all your bills coming in at once? Consider reaching out to some vendors and see if you can get billed on a different day of the month. This is very easy and often agreeable Overdraft protection can come in handy once in a while, but you simply shouldn't need it. Plan better.

Set up a Buffer

At the very least, make sure you have an extra $200 at the end of the month as a cushion.  If you have trouble doing that, try setting up a Buffer account.  

You've got this!

 

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