Overdraft Protection: 5 Tips to Minimize Overdraft Penalties

If you are in a situation where you are struggling financially and living from paycheck to paycheck, you are like most other people.

In your situation, it is very likely that you will have trouble maintaining a personal or account or business savings account with a large balance. As time goes by, you may find yourself writing checks or withdrawing money from your accounts when you do not have sufficient funds to cover the said withdrawal. If you write a check without checking your balance first (which is easy to do), you may not even realize that you have insufficient funds.

Many times, the banks will go ahead and cash your check anyway because they want to keep your business. This is particularly true if you are enrolled in overdraft protection. With this type of program, your bank will honor your outstanding charges, but they will charge a fee in the process. In a way, your bank will likely treat the money they use to cover your overdrawn account like a very short-term loan. The “interest” you pay on this loan is called an overdraft fee or overdraft charge.

Typical overdraft charges these days range from $25-$35 per instance. And, it is entirely possible that you could incur more than one charge in a single day. This can really add up fast, and soon your will owe your bank a lot of money.

The best way to protect yourself from overdraft charges is by following these five simple tips:

1. Check your account balance frequently online or by phone; also, your bank may offer a phone app to allow you to do the same
2. Pay the bank back the difference (the amount overdrawn) the same day it occurs; this could help you avoid paying a fee
3. Check your balance before sending checks or making debit purchases
4. Deposit money into your account at the right time to avoid bouncing checks
5. Switch to a no-overdraft-fee bank

If you follow the above tips, you will have a more stable financial life and a more pleasant banking experience. No longer will you pay penalty fees or treat your overdraft money as a loan.