It’s not surprising that banks continue to hand out fees at an alarming rate. In 2017 alone, Americans paid out $34 billion in overdraft fees, a 3% increase from 2016. With an average overdraft fee at a bank coming in at $30, it’s no wonder banks are wary to eliminate these fees as a part of their revenue stream. While some newcomer neo-banks are coming in and changing the market by offering low or no overdraft fees at all, the incumbents are not expected to change their way of doing business. With a solution not being offered by the big banks, it’s left on us, the consumers, to tackle these fees on our own. We’ll cover tips below to help you address the onslaught of fees, in particular, overdraft fees.
Keep in mind that while some, or even all of these suggestions may be applicable, it’s important to check with your bank. Some banks, despite having good intentions of providing services to protect you, may still charge you to turn-on features, or if protection is triggered in your account. The safest way to protect your account from overdrafts is to make sure you track your balance. Some apps alert you as soon as they predict an overdraft may occur. Read on for our other tips for eliminating overdraft fees,
1. Set up a linked savings account for overdraft transfers
2. Opt-out of overdraft coverage
3. Switch to a bank that doesn’t have overdraft fees
Some banks allow you to select a savings account, at the same bank as your checking account, to act as a “backup” in case of an overdraft. If you wind up in a situation where there is not enough money in your checking account to cover a charge, your linked account will be used to cover the transaction. This can be helpful in case of an emergency, or for a purchase that you hadn’t predicted but need to make on your debit card. You’ll have satisfaction knowing you are protected by your funds, and not charged by your bank to offer protection.
It may sound counter-intuitive, but one of the quickest ways to avoid overdraft fees when using your card is to not opt-in to overdraft protection. While it may sound attractive to have the option for protection on your account, most people don’t realize this comes with associated fees. By opting out, you aren’t putting yourself in more danger, but instead, are telling the bank to decline transactions that would overdraw your account. If you do opt-out, don’t be surprised if your card is swiped and possibly declined. But keep in mind, this decline is a way of signaling that you have inadequate funds available to cover the cost of the transaction.
Banks are struggling to find new ways to offer advantages over one another, and as a result, we, the consumer, wins. As a result of handing out higher savings account yields, sign-up bonuses, and other benefits, banks are doing everything they can to attract more accounts. One of these many features includes, in some cases, the elimination of overdraft fees entirely. New banks like Chime and N26 are offering overdraft fees up to certain transaction sizes. While this isn’t new in Europe, in the US, it’s an entirely new way of doing business that can benefit you, the customer.
Reading is the easy part. Things get hard when you start to apply what you learn. Growing your savings takes time, building smarter spending habits requires effort, and keeping tabs on it all can feel tedious.
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