Here are 6 good ways to avoid checking account overdraft fees.
Today’s reality may become tomorrow’s grief. Banks and credit unions are a money oriented business, based on your account. The best example is how they process larger checks first, or termed transaction. The reality? This process produces more overdraft fees, which equates to large profits for the bank or credit union.
“It is important for you to understand how banks and credit unions process checks, and a person also understands there are ways to prevent overdraft fees,” says Joyce Patten, a Consumer Protection advocate. “To be forgiven for one fee, when you’ve faulted on several others, and they have made quite a profit from you, is simply considered good marketing within their industry,” she says.
Consumer protection laws have not been able to penetrate the shroud of questionable banking practices, for example the moving around of deposit and withdrawal dates, and the actual presumptive dates from checking transaction to bank fulfillment. Never the less whether right or wrong, it is you that pays the overdraft fees and tight household budgets cannot absorb these fees. Keeping track of your money is mandatory.
1. Do not rely on the available balance given by your Internet bank or credit union statement, or mailed statement for that matter. Too many changes take place in the evening hours, or from the time you receive your statement in the mail. So keep a running balance of All money paid out. “Entries into your bank or credit union account log are paramount, a priority that should not be ignored or put-off until later,” Joyce says. “Easier said than done, I know, but it is foolish to receive an overdraft fee because you waited until later to make an entry in your log, but forgot. Very costly.”
2. Balance your checkbook yourself, keeping an accurate log of All transactions up to date. “Many banks and credit unions have free “check balancing” services, and done online. These electronic balances only provide what the bank has received, but still do not consider “pending” transactions as a reality within the electronic calculation,” Joyce warns. So with a shrug and an “I’m sorry,” from the bank clerk, they will still take the overdraft fee when your account is overdrawn, even though you relied on their electronic calculator on the Internet.
3. To avoid overdraft fees totally there is the “envelope system” of spending your cash. This will coordinate with your budget and when used, actually works, and better yet is easy to do. Divide your expenses and spending situations into categories. Mark an envelope for each category and place the cash, or budget amount allotted for that category, into the envelope. When the envelope is empty then you are done spending in that category until pay day.
4. Keep in mind the “overdraft fee” is a program offered so you will not have checks bounce back to the business or person it was written. You “Opted-In” when you started the checking account. But there is a way to take care of this. First “Opt Out” of the overdraft fee protection program and read option number 5 below.
5. Use the bank or a credit union “line of credit program” instead of the overdraft fee program. A finance charge of a few cents for the line of credit fee compared to an overdraft fee of $20 or $30 dollars is a large difference. This can also be done by linking one of their credit card programs with a low interest rate, to your checking account.
6. If your bank or credit union offers a “balance notification program”, use it. Trial and error will give you the correct amount for notification to stop spending, to buffer yourself from overdraft fees.
“Unfortunately, the fact is there is nothing the bank or a credit union does that is favorable to you and your money. The programs they offer you are to protect the institution, or obtain miscellaneous profits from you,” Joyce explains.
It is entirely up to you to assure your money is safe. Practicality in choosing a bank or credit union is a must-do, and due diligence is required while making a proper choice.
Know the specific processing situation within your bank or credit union, such as cut-off times for deposit, when the mail is received and how soon is your check processed, or when is a transaction listed for next day processing, are weekends included, and more. Be consistent with your bank or credit union account log, a system that is for your benefit and in reality can save you a lot of money over time.
Consider this: If you fill out your account log correctly, with All transactions up to the minute, there is no reason to concern yourself with overdraft fees.