Tips to Avoid Bank Checking Account Overdrafts

Here are tips on how to avoid overdrafts to your checking account from USA Today:

• Balance your checkbook
• Ask bank about its order of check, debit processing
• Know deposits may take longer to clear than checks
• If you're charged fees, ask the bank to waive them
• Read bank's deposit agreement
• Sign up for a low-cost transfer from savings for overdrafts

Here's my tip: keep more in your checking account than the amount you write checks for. Sheesh -- is this issue really that difficult?

I guess it must be. According to the article, banks make $53.1 billion -- yes, that's "billion" with a "b" -- off these sorts of fees every year. Yikes.

Instead of giving your money to a bank, keep it for yourself. Saving Money on Banking has some ideas on how to do this.

Comments

[Blaine Moore (First Time Homeowner)]

I have a very simple system for my checking account. Any money that I spend on a credit card I consider deducted from the checking account, and any payments I make (even if they are future payments) I consider deducted from the checking account. I let the bank keep track of my current balance; the balance I consider that I have is always lower, and if the balance I think I have is less than a couple of hundred dollars then I just don't schedule any payments or write any checks until I know that the next paycheck has cleared.

If I need money before then, I would just transfer some cash from my savings account. That situation has never arisen yet, however. Usually I have a surplus at the end of the month that gets moved over to the savings account.

[Denise]

Funny this post should be on the blog today. I've been thinking through the approach of sweeping any extra funds into a high-interest account at a separate institution than my checking account because I have a bad habit of keeping too much in my checking account as padding to avoid overdraft fees. That's just leaving money on the table by missing the high interest. However, I'm concerned about the timing/delays and any fees associated with inter institution transfers.

Does anyone out there have experience with transfers between Citibank's esavings and Chase's basic checking -- or any high-interest web-based savings account and a standard checking account that can shed some light?

[Tom]

My system is simple. I always keep at least enough in the checking account to cover my single largest expense. In my case its the rent. When it comes time to pay the rent, I keep double the rent in my checking until the rent check clears. To me that seems an appropriate safety bubble.

One word about overdraft fees. Its not the end of the world. It doesn't go on your credit report, it doesn't prevent you from opening up accounts in the future (unless your account gets closed out due to overdrafts and/or fraud), and you are not the only one. If you do get an overdraft fee, talk to your local bank. They are almost always willing to reverse a couple fees per year for a decent customer. And try not to be so damned embarrassed! (This is coming from a banker.)