3 Tips for Avoiding Overdraft Fees

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Don't waste your hard-earned money on avoidable bank fees.


Key points

  • Overdraft fees hit a record high during the pandemic.
  • In 2021, the average overdraft fee was more than $33.
  • Fees can be avoided by, for example, monitoring your account balance.

Overdraft fees have always been an unnecessary expense that tends to hit the people who can least afford it the hardest. And unfortunately, things have only grown worse during the pandemic. Fees hit record highs in 2021, with the average overdraft fee coming in at just over $33.

But while banks may charge a lot if you overdraft your account --- which means you try to spend more than the available balance -- there are ways to avoid these fees. Here are some tips to help you do so.

1. Keep a cushion in your account

One easy way to make sure you avoid overdraft fees is to keep extra money in your account.

If you have an extra few hundred or few thousand dollars sitting in your bank account (depending on your income and usual expenditures), then it is far less likely that you'll mistakenly forget a check or make too many purchases and end up going negative and getting hit with an overdraft fee.

Of course, not everyone can afford to leave a lot of extra money just sitting in their checking account -- especially if you aren't earning any interest on the account. But, if you do have even a little bit extra to simply put into checking, this could potentially save you from costly fees that make your financial situation worse.

2. Track your checks and transactions

Keeping track of all of your spending and income could also help you avoid overdraft fees. If you know exactly how much was put into your account and how much you'll be taking out of it, you won't make an error that leaves you with an overdraft.

If you take this approach, be sure to take into account any automatic payments that come out of your account -- especially periodic ones that happen only quarterly or annually and can be easy to forget.

Online checking and mobile banking apps make it easier than ever to track your account deposits and outflows. But, if you write checks that people or businesses don't cash for a while, you'll still have to keep track of all these manually so a check clearing late doesn't catch you by surprise.

3. Choose a bank that doesn't charge overdraft fees

Both of the first two approaches require you to do the work of avoiding overdraft fees. But if you are short on money and have a busy life, it can be hard to stay on top of things -- and you don't want to make a costly mistake.

If you want to make absolutely certain you don't get hit with overdraft fees, the best and easiest approach is to pick a bank that doesn't charge them. A growing number of financial institutions -- especially some online banks -- have eliminated these fees. Prioritizing the promise of no overdraft fees as a feature could help ensure you never have to worry about overdraft charges again. Just be sure to read the fine print and confirm there really are no hidden charges.

Of course, it's still a good idea to keep track of the money in your account even without overdraft fees to worry about so you'll know what you have to spend. But not having to pay a big fee because of a simple error could be a huge benefit. Be sure to know your bank's rules and find one that's a good fit.

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