Tuesday, 7 July 2020

Overdrawing your checking account can feel like a punch in the financial gut. Not only can it be embarrassing and stressful, it can also cost you.

However, there are some steps you can take to help avoid overdrawing your account, and ways to reduce fees if you accidentally do.

How to avoid overdrawing your account

  • Check your balance regularly. With online, mobile, and ATM banking, you can check your balance frequently so you know how much money you have in your account. Online and mobile banking allows you to quickly log into your account from your computer or mobile device and immediately see your balance, posted and pending transactions and more. And you can log in as often as you want from anywhere you have secure internet access. You can also check your balance and even get a mini-account statement at many ATMs.
  • Set up account alerts. You can receive notifications about your account by setting up alerts in online and mobile banking. To help you avoid overdrafts, you can choose to be alerted when your account balance drops to a certain dollar amount. Then you'll know to either stop spending or make a deposit so you don't overdraw your account. In most cases, you can opt for text alerts, email alerts or both.

How to reduce overdraft fees

  • Review your Opt-In/Opt-out selections for your checking account. In general, most checking accounts today come with some type of courtesy overdraft service, which will allow checks to clear and ATM and debit card transactions to still go through, even if you don't have enough money in your account, in exchange for a fee. However, it's up to you to decide how the bank will handle your ATM and everyday debit card transactions when there is not enough money in your account, often referred to as your “Opt-in/Opt-out" selections. As a customer, it's important to understand and review your Opt-in/Opt-out selections for your checking account to make sure you have made the choice that is right for you.

    Choosing to Opt-in means you would like the bank to allow your ATM and everyday debit card transactions to go through if you don't have enough money in your account, realizing you will be charged an overdraft fee. Choosing to Opt- out means you would like the bank to decline your ATM and everyday debit card transactions if you don't have enough money in your account, avoiding the overdraft fee, but realizing you will either need to use a different form of payment or abandon the purchase.

    Every bank has different policies and fees, so check with your bank to see how their overdraft services work. In many cases, you can see and change your Opt- in/Opt-out selections from your online banking dashboard.
  • Apply for an overdraft protection line of credit. When you link your checking account to an overdraft protection line of credit, money will be transferred from the line to cover overdrafts.

    You must apply and qualify for the line of credit. Some banks charge a fee for each overdraft that is covered, but typically this fee is less than the standard overdraft fee.
  • Link accounts for overdraft sweep. With this option, you link your checking account to another account you have at the bank, such as a savings or money market account, and money is transferred from the linked account to cover overdrafts. You might be charged a transfer fee for the service, but again, it will typically be lower than a standard overdraft charge. 

Take steps to avoid overdrawing your account

Just about everyone has slipped up and overdrawn their checking account at some point. But with all-in-one online account access and a range of overdraft protection options, avoiding costly overdrafts can be easier than ever.

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