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How To Avoid Banking Overdraft Fees

By Erik Folgate

There are many things that I hate paying for in life, but bank fees are definitely in my top three for most hated expenses. When you deposit your money into a commercial bank, you are already doing them a favor, because that increases their ability to loan more money to other customers and make money from the loan interest. Nickel and diming you with exorbitant fees is not good customer service, yet many banks still try to get away with it. Now with the government sticking their noses in banking interest rates and foreclosure costs, banks will look to fees more than ever to make up for lost revenue.

Overdrafting your bank account is not the bank’s fault, it’s your fault. This is a fee that you can prevent by taking a few steps to ensure it doesn’t happen. Here are some tips to make sure that you never pay an overdraft fee.

Stop using your debit card so much

The debit card is a great banking invention. It has made writing checks obsolete, but it has also made it harder to keep track of transactions. Before the debit card, you wrote a check for big purchases and paid cash for minor purchases. Now, you can go through an entire day using your debit card five to ten times on small and large purchases. The debit card is one of the biggest reasons for overdrafts. My wife and I do two things to avoid excessively swiping our debit cards. We give each other petty cash every two weeks to use on whatever want like a latte, lunch, or any other small purchase. We also take out cash for entertainnment, groceries, and household products.

Change your overdraft limit to $0.

Banks try to trick you into thinking they are providing a service to you by giving you an overdraft limit of “X” amount of dollars. This ensures that a check won’t bounce or your debit card won’t get denied. Then, they’ll slap an overdraft fee on you of $35, oh and by the way, it’s $35 for every transaction that goes through past $0, so you could end up with two or three $35 fees. Set your overdraft limit to $0, and your debit card will not be allowed to overdraft your account. If you are balancing your checkbook and keeping track of checks that you write, you should never have a problem with a check bouncing.

Use the ING Direct Checking Account

If you hardly ever write checks and your main deposits are your paycheck, the ING Direct checking account might be a good option for you. You get a debit card, the ability to write checks to anyone with an address, pay bills online, and set up direct deposit of paychecks. If you overdraft on your ING checking account, there are NO overdraft fees. It gives you a $500 overdraft limit and charges you a 7.25% APR on the overdraft amount. It’s still a fee, but much less than $35, unless you let it sit in the negative for a long period of time.

Here at Money Crashers, we want to help you keep more money in your pocket. Paying bank fees should not be in your vocabulary. They aren’t necessary, you have options, and if you are ever charged with a bank fee, most banks will credit it back to you if you take the time to call customer service and ask for them to remove the fee. I have had multiple overdraft fees removed, because I called customer service, explained the situation, and showed them that it was not a regular occurrence. Don’t pay overdraft fees!

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • Mayra Cedillo

    My brother’s paid the banks over a thousand in overdraft fees. They have used sneaky, awful tricks like listing charges out of order according to dates in order to charge several overdraft fees instead of one. For example if on one day he made three purchase under 10 bucks but still had money in his account that day, but then the next day he went over with one charge, they would post the charges out of order so that the one he went over is posted first and then the three charges of the day prior. This let them charge him 4 38 dollar overdraft fees (a total of 152 bucks) instead of one overdraft fee as it should have been. Banks can be so awful.

  • http://www.artificialrobot.com Sean

    Overdraft is big business for the banks, it will be interesting to see what happens now that the opt-in legislation is going into effect. I didn’t realize that ING offered the “auto-loan” as opposed to overdraft, it’s certainly innovative and strikes a balance.

  • DG

    good solid advice. one of my friends kept shopping on a trip a few months ago and kept overdrawing. it was ridiculous. I should recommend that she should change her overdraft limit to 0 just as you suggest!

  • Jake

    The problem I see with changing your overdraft limit to 0 is you’re still not being financially responsible. Yes, you won’t get charged overdraft fees since you can’t overdraw, but it’s still careless to blindly buy stuff or withdraw money until you’re down to nothing. It’s better to keep track of your money to make sure you always have something in your checking account. People need to learn how to budget for the month.

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