“There’s a loss of faith in the banking system that for so long has been the backbone of prosperity and growth.” -Lucy Powell
Do you find yourself constantly paying overdraft fees? Has it become a bill you expect to pay every month? According to CNN Money, banks racked up $6.4 billion in ATM and overdraft fees in 2016 alone. If you’re tired of paying unnecessary money to the bank, check out the tips below.
Tip #1: Find the Right Bank for You
There’s a big misconception that all banks work the same. That is totally not true! You need to weigh your options and browse through the features that each bank offers. You’ll also want to decide what type of financial institution you want to do your banking with. There are credit unions, community banks, and large retail banks. Finding a financial institution that’s right for you will make a huge difference when it comes to paying bank fees. Being at a bank that fits your style of handling money helps you avoid the little mistakes that cause overdraft fees.
When you’re at a bank that fits your style of handling money, you tend to avoid the little mistakes that get you caught up in overdraft fees.
Tip #2: Develop an Expense Tracking Method
I personally do it the old fashion way by just using a transaction register, however I understand that this method doesn’t work for everyone. There are other options such as mobile alerts and account notifications. You can set your balance and spending preferences online. The bank will notify you when you’re getting close to that limit. You can also keep a running total of what you’ve spent in a day in your phone, and at the end, compare what has cleared through your online banking. If an item hasn’t cleared, simply subtract that amount from the available balance online. That should give you a pretty accurate total of what you can spend. Lastly, there are tons of mobile expense tracking apps that keep you up to date on the go.
Tip #3: Set Up Overdraft Protection
The easiest way to avoid large bank fees is to have some sort of contingency plan aka overdraft protection. This is typically a savings account that is linked to your checking. It should not be your main savings account, but a small one that is available for uncontrollable situations. You may still incur a bank fee for overdraft protection (depending on your financial institution), but it is much smaller than a non-sufficient funds fee. Other overdraft protection includes credit cards and lines of credit, but be extremely careful with those options because you can increase your debt load and lower your credit score.
Tip #4: Opt Out of Bank Overdraft Protection
I know this seems like a contradiction to Tip #3, but let me explain. Bank overdraft protection is when you authorize the bank to let your transactions go through, even if you don’t have the available funds. You agree to pay the overdraft fee for that item. This only applies if you DO NOT have any other form of overdraft protection, OR you have no funds available in your overdraft protection accounts. When you chose to opt out of the bank’s overdraft protection, you are basically telling the bank NOT to let your transactions go through if you don’t have the funds available. For example, if you have $30 in your account and attempt to make a purchase for $35, your transaction will be declined due to non-sufficient funds. This can be embarrassing, but you will save yourself a heck of a lot of money in the long run.
By law, people can opt out of ATM overdrafts at any time. -CNN Money
Learning how to avoid bank fees will not only save you money, but will help you build a solid banking relationship which often leads to lower interest rates and faster approvals.