Overdrafting

(Disclaimer, all opinions and thoughts in this blog are of my own and expressed by no company, no advice or ideas should be used as advice, legal or otherwise)


    Today we are going to talk about those most dreaded fees, how they really work, and how best you can avoid them. To best understand how to avoid the fee, we will first talk about all the details that cause them and circumstances where you will still get a fee, even though you probably feel like you shouldn't (But you still will).

    Overdrafts are caused mostly when you spend money that wasn't in the account, obviously. But, there are other situations where they can occur even without you realising it. An example that is becoming more and more common, you pay your phone bill for 100$ and they take the money out of your account. So you check your balance and see you have 50 dollars, the next day you spend that 50$ and check your balance and you still have 50$, So you buy a few things that you need. The day after you are now overdrawn, even though your account showed you had that 50$ in there, why? What happens most of the time in these situations is that your phone company took the money out, then they put it back in, or canceled the transaction; choosing to run it at another time. So your balance was wrong because the amount they were suppose to take out is not factored in. Now no bank has the technology to predict this happening, so they see it as you spending money that you didn't have and will charge you overdrafts. A similar situation is if you make a purchase one Tuesday knowing a direct deposit will come in Wednesday, trying to beat the overdraft, this idea is similar to floating checks, and is a very bad idea. Banks can see you trying to float a purchase and they will charge you a full fee for this.

A quick side-note, many banks are also offering accounts that "don't allow overdrafts". This usually means that if you try and slide your card and you don't have money, it will not work.You will still get overdraft fees for writing checks without funds, or if any of the situations above occur. There is no account that just flat out does not overdraft you.

    So, the big question here is how do we avoid these fees. With the fees ranging from 15-35 dollars, sometimes even higher, no one these days can afford to pay them. The first thing you need to do is avoid automatic payments. If you are constantly over drafting because you forget when your payments come out, find a different way to pay these companies. Is your 8 dollars service to Netflix really worth the extra 35 dollars, or potentially more? The second thing you need to do is write down every transaction you make, it may seem old school, but it will help. Once you write down your transactions, go online and read all the transactions listed...you may find some are missing, and that money has not come out of your account, this will cause an overdraft. If need be you can always separate out your purchases, for example: have one account that only pays bills, and once your bills are paid move the remaining money to another account, that way you don't accidentally spend your bill money. And lastly, have overdraft protection, even if its from a credit card. There is no sense in paying 35 dollars extra for anything, at all.