Avoiding overdraft fees is fairly simple if you’re proactive with your account and budget. Use the tips below to avoid paying overdraft fees.
1. Opt out of automatic overdrafts
When you open a checking account, banks may give you the option to opt-in for automatic overdrafts. That means you can reject automatic overdrafts, preventing you from ever having to pay an overdraft fee in the first place.
This disclosure is usually in the paperwork the bank provides when you open the account — look for it in the section covering account opening disclosures.
The caveat to this method is that if you opt-out, you’ll have no way to cover a purchase exceeding your available balance. The bank will return any failed payments to you as “unpaid” — unless you sign up for overdraft protection, which we’ll discuss below.
2. Use overdraft protection (link to a secondary account)
If you have a savings account or a second checking account tied to your main account, consider signing up for overdraft protection if your bank offers it (not all do). But what is overdraft protection?
Overdraft protection is a service that allows you to link your main checking account to another account, like your savings or a secondary checking account. This way, the bank will pull funds from your secondary account to cover an overdrawn charge — and help you avoid an overdraft fee.
That said, there may still be a fee for this service, but it’s likely lower than the cost of an overdraft charge.
3. Set up account alerts
One common reason people wind up with overdraft fees is that they carry a low account balance. An easy solution is to set up account alerts so you always know when your balance drops past a certain amount.
4. Use a service that doesn’t charge overdraft fees
While some banks still charge overdraft fees, plenty have eliminated them. If you’re prone to frequent overdraft charges, consider switching to a bank with lower or no fees to eliminate the issue.
5. Cover the overdrawn charge as soon as possible
It’s best to cover overdrawn charges as soon as possible — especially if you bank somewhere that will dismiss the overdraft fee if you pay the negative balance within a business day. Check with your bank to see if they offer this.
If you can’t find an answer on their website, call customer service — even if your bank doesn’t officially offer this service, it’s worth asking if it may get your overdraft fee cleared.
