Best Ways to Avoid Overdraft Fees


Banks are businesses looking to turn a profit. Like the coffee shop where you bought your morning latte, they seek to make money from consumers.


You don’t go to a bank to buy or return like you would in the commerce world. Yet you are giving the bank something (money) and getting something in return (an active account).


Banks need to make a profit to continue running. This understanding brings a lot of meaning to the dozens of fees you are subjected too, and one of the most frustrating is overdraft fees. The last thing you want to do is pay when your account is already feeling the strain.


Continue reading below to find the top tactics to avoid paying major overdraft fees and keep your money in your account.


Stick to a Budget and Review Your Spending


Oftentimes, overdraft fees occur because you spend without structure. With this in mind, budgeting is one of the best strategies you can use to avoid overdrafts.


A budget is not meant to be restricting but freeing in your relationship with money. It gives you the structure to spend wisely and know how much you can allot per expense.


In combination with a budget, you should build the habit of reviewing your weekly spending.


A quick review of what you have spent in the week shows whether you’re on track with your budget or not. Start simple by logging into your bank account and checking spends against your budget. This process gives you the time to course correct if you’ve overspent and are nearing overdraft. Otherwise, it’s too easy to think you have money available, especially during an impulse purchase, when in reality a previous purchase hasn’t reflected in your account yet.


Use Cash not Cards


Find that you’ve built an ongoing habit of spending too much and going over budget? That’s a disaster waiting to happen with overdraft fees, sometimes multiple in one month.


Now is the time to put your debit card away and start using cash for purchases.


Mentally and emotionally, swiping a card doesn’t carry the same weight as handing over money. Paying with cash means you need to physically withdraw your hard-earned money. That action can be eye-opening as you want to see cash used intentionally. Card swipes carry far less intention and are easy to forget.


Using cash will keep you on your budget and out of your bank account where it’s easy to overdraw. Set up major expenses on auto pay and withdraw the amount of cash you have budgeted for other expenses each month. This just may be the most effective method of all.


Turn on Bank Notifications


Technology is useful to ensure your financial prowess. Make sure to research the many notifications, alerts, and amenities available to you through your online bank portal. You would be surprised by how much you find there.


Setting up overdraft notifications is one many banks offer to help you avoid a zero balance. This is a last line of defense between you paying an exorbitant fee and taking action on a low balance account.


Overdraft notifications alert the user when a checking account is below a certain amount. This gives you time to review your spending, cut costs, and add additional funds. Bank notifications give an extra layer of security to your spending. You can breathe easy knowing your account will keep you in-line.


Include Leeway in Your Available Balance


The final method to avoid overdraft fees is simple. When reviewing your weekly spending, round up the amounts you’ve spent to the full dollar. This easy action gives you a bit of leeway in your available balance each week.


For example, let’s say that you purchase groceries for $72.39 and a shirt for $23.63. Round up both totals to the full dollar, $73 and $24, respectively. This may appear small, but don’t be fooled. Rounding up your purchases will add several dollars extra that you didn’t account for at the start of the month.


$5 throughout the month can mean the difference between having an active account or paying $30+ in overdraft fees. Small actions create major change in your financial picture, so don’t discount the baby steps.


Time to Avoid Overdraft Fees


Banks are in business to make money and you are their customer. The many different fees banks charge, including overdrafts, can add up to hundreds of dollars a year. You can avoid fees by reviewing your budget weekly, using cash in applicable situations, turning on account notifications, and rounding up your spending. These four methods will keep your account in the green so that you can hold on to every dollar of your hard-earned money.


If you find these tips helpful, get into our forum to share your own money hacks and learn with others who are becoming financially savvy.

P.S. It doesn’t hurt to contact the bank and ask for them to credit a fee. The worst that they can say is ‘no’.