How to Avoid Overdraft Fees?

Overdraft fees can easily send you into a spiral that can be difficult to stop. It can cost you hundreds of dollars every year. And these overdraft fees are charged per item (debit card transaction or check) that comes in after you have a negative balance. 

First, it is important to understand the costs of overdraft fees. Many banks charge around $35.00 for each item that puts you into the overdraft (or more).  This is one of the ways that banks make money off their customers and why online banking is becoming more popular (many remove fees or offer some protection). 

Understand the True Costs of Overdraft Fees

There are several steps that you can take to break the overdraft fees cycle and to make sure you never pay the fees at all.  

How to Avoid Overdraft Fees

The first thing you can do to protect yourself from overdraft fees is to see if your bank offers an option to have a cash reserve account. 

Sign Up for Overdraft Protection

You can do this by keeping a record of your direct deposits, automatic withdrawals, checks, and debit card transactions to ensure your account balance has enough money and has sufficient funds for your needs. 

Avoiding Overdraft Fees by Monitoring Your Checking Account Balance

Many people will check their current balance at the ATM or online and assume that they have enough money in their accounts to cover a specific purchase. This does not work because the current available balance may not reflect things like upcoming automatic withdrawals.

Don’t Rely on the ATM Balance to Help You Prevent Overdraft Fees

There are steps that you can take to help you bring your account back to a positive balance and avoid accruing any more overdraft fees.

Breaking the Overdraft Cycle

A budget is simply a spending plan. This allows you to start spending your money with purpose and determine how much you are going to spend when.

1. First, you should set up a budget

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