Nobody likes being nickel-and-dimed by their bank but one of the biggest revenue generators for most banks and poor credit history unions are overdraft fees. Banks historically have been able to provide overdraft protection to their customers to help prevent checks bouncing and debit cards being declined for insufficient funds. However, most banks charge a fee of between $20 and $30 for each instance of overdraft protection leading to some major transaction costs for bank customers.
New legislation designed to curb abuses and unfair practices in the financial sector will go into effect for ATM and debit card transactions during the summer of 2010 which should provide some relief from fees to bank customers. However, here are five tips that you can use today to make sure you never pay overdraft fees again.
Opt Out: Most banks allow their customers to opt out of an overdraft protection plan by talking to a banker or calling a customer service telephone number. The downside is that checks will be returned and debit card purchases will be declined when there are insufficient funds in the account, but many bank customers would prefer this to having no control over the amounts of fees being charged.
Link Accounts: Many financial institutions offer customers the ability to link accounts together so that the overdraft protection comes not from the bank, but from one of your other accounts. If you have a savings account and a checking account, ask your bank if they can set up a way to automatically cover checking account purchases from your savings account if funds aren’t available when the transaction is processed. Some banks charge a fee for this service but the fee is generally much less than the fee for an overdrawn account.
Build A Buffer: The best way to avoid overdraft protection is to never spend money that isn’t in the account. If you can establish a cushion in your checking account of even a couple hundred dollars, you can greatly reduce your likelihood of spending your way into overdraft fees.
Deal in Cash: Another way to avoid overdraft fees is to use cash as much as possible. Cash in your hand is yours to spend and you’ll never be in the banks pocket this way. The downside risks include the facts that cash can be lost or stolen and that cash is more difficult to track if accounting for your expenditures is important to you.
Embrace Technology: More and more people are getting into the habit of checking the account balances and activity regularly either by phone, online, or using a mobile device. Many banks now offer e-mail or text message alerts that will automatically send you a message if your balance drops below a certain threshold. Most banks will provide this service for free but you have to sign up in order to take advantage of the program.
Ask For Forgiveness: Most banks have the ability to refund fees at least once or twice a year but they won’t extend a refund to you unless you ask. If you mistakenly accrue a fee but have a history of maintaining strong balances in your account, ask a bank employee if the fee can be refunded based on your history as a reliable customer.
