A recent report in Financial Times reveals that US Banks stand to take in over $38 Billion in overdraft fees from their customers this year! The bulk of this revenue is said to come from, “the most financially stretched consumers amid the deepest recession since the 1930s, according to research.”
Checking account overdraft fees now account for more than 75% of the fees banks charge on consumer deposits. The median overdraft fee is $26, and can be much higher. Worse, the fee can be assessed each time you overdraw your account, up to several times a day according to the report. Disturbing news if you happen to have a checking account, isn’t it?
The good news is that overdraft fees can be easily avoided with a little forethought on your part. These tips work whether you keep your check register manually or electronically:
How to Avoid Overdraft Fees
- Keep your Register Updated. Simply put, if you don’t know how much money is in your checking account right now, then you are at risk of overdrawing your account. Many people think keeping a check register up to date is a hassle. Instead, make it a habit by entering each check or debit card purchase as it is made. Set aside time when you get home to balance the register. Do this every time you spend, and soon it will be second nature.
- Don’t Forget ATM Withdrawals. One of the easiest ways to lose track of your money is to forget to record cash you withdraw from an ATM. It happens to people all the time – they forget to record the withdrawal and when the bank statement comes they find out they have $50 or $100 or whatever amount less than they thought they had. Nip this potential problem in the bud by always getting an ATM receipt. Place the receipt in a safe place. When you get home refer to the receipt to enter the withdrawal into your register.
- Remember to Record Automatic Payments. Having your utility or insurance company automatically take payments out of your checking account can be very convenient. Overdrawing your account because you forgot to record an automatic payment is decidedly inconvenient.
- Review your Statement. The best way to keep tabs on your checking account is to compare the monthly statement to your check register. Any discrepancies need to be taken care of immediately. If you have done a good job keeping track of your money there will never be a discrepancy – and that is the goal.
- Cushion your Checking Account. Having a little cushion in your account is probably the most effective way to stop overdraft fees when all else fails. To create a cushion, record a withdrawal in your register of $100 or whatever you want the cushion amount to be but leave the money there. Try to forget about the cushion and carry on as usual. If you get into trouble and accidentally spend more than your balance that $100 (or whatever amount) will be sitting there to take up the slack, and hopefully prevent a nasty fee.