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We’ve all been there—you write a check, get cash from the ATM, or buy something using your debit card only to find out too late there’s not enough money in your account to cover the transaction.
These overdrafts result in a negative balance—and overdraft fees, which can add up fast. The best way to avoid overdraft fees is to be informed and to stay on top of your account activity. Here are some helpful tips to keep in mind.
Research overdraft options on checking accounts.
Research and compare checking account features such as minimum balance requirements, overdraft fees, and maintenance costs. Consider a checking account with lower overdraft fees or a prepaid card with lower fees. You can also choose a checking account that does not authorize overdrafts.
Understand posting order.
Overdrafts are often caused by posting order—the order in which transactions like deposits, withdrawals, and purchases post to your checking account on a given day. Transactions can sometimes take longer than expected to post, which can cause you to overestimate how much money you have to spend. When this happens, you may accidentally overdraw your account and incur an overdraft fee.
Record your ATM withdrawals, deposits, and debit card transactions, including the times you expect transactions to post. When checking your balance, remember that some automatic payments and checks may not have cleared yet.
Set up low balance alerts.
Get a text or email when your account balance drops below an amount you set. These alerts, along with other handy alerts for balance updates, large withdrawals, and large deposits can help you proactively manage your money before you overdraw your account.
Link your checking account to a savings or credit card account.
Ask your banker to set up an automatic transfer of funds from a savings account when your checking account balance falls below a target balance you set. If you link to another account, when you exceed your checking account balance, your bank or credit union will pull funds from your savings or credit card to cover the transaction. However, the transfer from the linked account may incur a transfer fee, although this fee is typically lower than an overdraft fee.
Think carefully before you opt-in to your financial institution’s overdraft service.
If you don’t opt into an overdraft service, your financial institution will not charge you overdraft fees for ATM or one-time debit card purchases. However, ATM and one-time debit card purchases will be declined if there is not enough money in your account to cover the transaction.
Overdraft fees can cost you—and they add up fast. Your banker is happy to help you understand your balance, our funds availability policy, and when items are processed.
Additionally, we have collected several educational resources to help you learn how to prevent overdraft fees, create a budget, manage your debt, and develop healthy financial habits. Learn more at firstinterstate.com/overdraft.