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Marriage and Money

Financial advice for avoiding budget-busting overdraft fees

Overdraft fees can surprise even the most careful of spenders. From miscommunication to miscalculation, overdraft fees can quickly get expensive. Here are a few tips to help avoid them altogether.

It can happen to the best of us. No matter how diligent you are about creating a budget and balancing your bank accounts, you sometimes get hit with unexpected overdraft fees that can wreak havoc on your monthly budget. In fact, the Pew Charitable Trusts found that nearly 7 out of 10 consumers who overdraft make less than $50,000 a year.1

In an effort to solve this problem, banks will often suggest services such as overdraft protection. However, adding this extra service typically isn't free. Banks are happy to charge you an additional fee for relying on them to add the protection, which really isn't sound financial advice if you're trying to find a solution in which to eliminate fees altogether.

A better idea might be to try one of the following options, such as free online budgeting tools that can help safeguard your bank account from being withdrawn in the first place - and they won't cost you a cent!

Option #1: Get on board with online and mobile banking

Most banks offer some type of online banking that makes it easy for you to closely monitor your accounts from your home PC or smartphone. Some banks even give you advanced notice of a pending overdraft so that you'll have some time to transfer money from a savings account (or to make a deposit at the local branch) to quickly cover the deficit. If your bank offers a mobile app, set up an alert on your smartphone to warn you when your balance falls below a certain threshold, say below $100. That can be a huge warning that you need to monitor your account until your next payday. Note: Financial institutions all operate differently, so check with your bank about how certain processes work.

Option #2: Use your credit card for basic monthly purchases

Warning, this method isn't for everyone. If in the past you've had trouble managing your credit card debt, then you may want to consider another option. However, the benefit of using a credit card for expenses such as gas and groceries is that you only have to write a single check every month instead of keeping track of multiple checks and/or debit transactions. But if you choose this method, be sure that you budget accordingly so that you can pay off the credit card balance in full when your statement arrives.

Option #3: Keep a cushion and forget about it

If you still use a checkbook register to keep track of your expenses and cash, then put some extra money in your checking account but don't record it in your checking account register. That way, you have a little unaccounted money rolling around that could help you avoid a bounced check and consequently, overdraft fees.

Having to pay for overdraft fees can ruin a budget - fast. The good thing is that they can be avoided by following proactive financial advice that includes finding a process that works for you.
For more financial tips, visit the Protective Learning Center.





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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

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