Knowing how to avoid over drafting is an excellent way to save money! You will not only save the money you spend on overdraft fees, but also you will have money left in your account. Over drafting is a trouble, but there are a few ways to avoid it.
1. Don’t rely strictly on your available balance
Often many people check their bank accounts to see their “available balance” and how much cash they have. But this is a big mistake since the available balance does not reflect the purchases that were made that day or 2 or 3 days prior! Some businesses can even have money pending for a few business days before it leaves your bank account.
2. Pick a buffer that works for you
Another way to avoid overdraft fees is to give yourself a buffer! Just pick a buffer that really works for you, for instance, $50 or $100 and once your bank account has slipped down to that balance, stop spending. Imagine that those money does not exist.
3. Use the envelope system
One of the best ways to avoid overdraft fees as well as overspending is the envelope system. On your payday, withdraw the amount of money you’re going to use for bills, gas, groceries, and leisure spending, and then divide money into envelopes. Once your money’s gone, don’t dip into other envelopes and don’t use your card!
4. Balance your checkbook weekly
Balancing your checkbook every week is one of the great ways to know how much money you have in your bank. Write down your expenses and subtract from your total balance. If you keep track of your balance, you’ll know how much you may spend!
5. Open a line of credit
If you get a line of credit account, it may act as backup money if you overdraft. You’ll still be charged a small fee, and sure you’ll have to pay back money that went onto your credit card, but the fee is usually much smaller than $35+ overdraft fee, which most banks charge!
6. Link a savings account to your spending account
It’s always a good idea to link a savings account to a spending account. That’s a little cushion if you overspend. The only slight downside to it is that you risk spending your savings without wanting to.
7. Never sign up for automatic withdrawals of your bills
Signing up for automatic payments can be convenient, but there’s risk of over drafting. It’s better to pay off manually so you will know for sure that the water/electric company is not overcharging you by accident. In case if your common account will be close to being empty, you can use another account to pay all your bills.
I had experienced the horrors of over drafting a few times, but these tips help me avoid over drafting and keep my money in order! Do you have any tips on how to avoid overdraft fees? Share them, please!