Several news stories over the past few months have highlighted the billions of dollars in revenues banks collect every year in the form of customer overdraft fees. You may have paid these fees yourself. Spending a few dollars more than you have in your account can be costly if there’s a fee of nearly $30 for every transaction. Banks argue that they are extending a courtesy to their customers by covering the transactions and the fee is in place to cover the convenience of fewer bounced checks and declined debit card transactions.
This week, Bank of America and JP Morgan Chase announced changes in their overdraft fee policies that will benefit their customers. Bank Of America will begin allowing customers to opt out of the automatic overdraft protection program and will not charge fees on more than four transactions per day. JPMorgan Chase will ask clients to opt in to an overdraft program and will only charge overdraft fees on up to three transactions per day. Both banks will eliminate fees for charges that just barely take account balances into negative territory.
Overdraft fees are an expensive nuisance for bank customers. Here are some ways that you can stay out of the negative side of the bank ledger and keep the bank out of your pocket.
- Know Your Balance: Many of the people who end up paying heavy overdraft fees have simply been careless and didn’t realize that their checking balance was low. Whether it’s balancing your checkbook the old fashioned way or monitoring your bank account online, keep tabs on how much money is available.
- Follow A Budget: If you strictly monitor and control your spending and your income is steady, then overdraft fees shouldn’t be a concern. There are several ways to successfully manage a budget. One method that many people use is the envelope system. Create an envelope for different categories of costs and put a set amount of cash in each envelope. If your entertainment envelope is empty, it means you shouldn’t spend money on entertainment until your next paycheck comes in and you reload your envelopes.
- Set Your Own Minimums: Your bank will let you draw your account down to nothing and then gladly charge you fees if you spend beyond that, but you can set a persona minimum account balance for yourself that you always maintain. If you tell yourself that you won’t go below $100 in your checking account and you monitor your spending closely, you should never have a problem with overdraft fees.
- Ask for Mercy: Most banks are willing to refund fees for people who overdraw their account for the first time. Some banks even offer a couple of fee waivers every year to help customers who make the occasional mistake of overspending. Your bank won’t call you to offer a refund though, so be bold and ask if the bank has the ability to forgive your overdraft fee.
