Have you ever been hit with an overdraft fee? That could be one of the most infuriating things to happen to you on a given day. It’s led many to start questioning the point and even the morality of charging someone money for not having enough money. Where is the sense in that? But it is currently a fact of life, so we must learn what they are exactly and how we can avoid them whenever we possibly can.
What are Overdraft Fees?
According to Credit Karma, an overdraft fee is an expense charged when a withdrawal from your bank account exceeds the amount of money available in it. Your bank covers the extra cost through an overdraft protection service, and the fee is charged in exchange for the banks covering costs. This overdraft protection prevents you from having your card declined when you attempt transactions past your balance.
How to Avoid Overdraft Fees
- Get Alerts for a Low Balance
You can automate your balance check ins by asking your bank to set up email and/or text message alerts for when your account balance is low. This way you can transfer some money straight into your account to avoid overdrafting or getting declined.
- Track your Spending through Mint
If you struggle to watch your spending, then you likely need to improve upon that, not only for the sake of overdrafts. Unchecked spending can lead you to great financial anxiety and increase your likelihood to keep living paycheck to paycheck.
- Opt Out of the Overdraft Coverage
This is the easiest solution to the problem of overdraft fees. Just simply opt out of the overdraft coverage program with your bank. After doing this, you may have to deal with the embarrassment of getting declined, but if you save a significant amount of money by doing so then it will likely be worth it.
Getting Out of the Paycheck to Paycheck Cycle
People who suffer most from overdraft fees tend to be those individuals living paycheck to paycheck. A surprising number of Americans are currently living paycheck to paycheck and it is very stressful. A large overdraft fee would not make that situation any better. So, if your overdraft fees are a result of too little funds altogether rather than an oversight, here are a few ideas for getting out of that horrible paycheck to paycheck cycle:
- Get Some Temporary Funding
Some individuals find getting some temporary funding helps them get back on their feet so they can make a budget or get a higher paying job. You can look into a home equity loan, personal loan, or a registration loan. Always be sure that you will be able to repay the loan in a timely manner, so you don’t end up defaulting, making your financial situation worse.
- Get a Side Hustle
Think about getting a side hustle to lift yourself out of the paycheck to paycheck lifestyle. Increasing your monthly income could allow you to start putting money aside for the future and give you a little extra cushion to see where you might be able to alter your budget. You could drive for Uber or Lyft, be a dogwalker with Rover or Wag, and any other number of great side jobs.
The post Overdraft Fees: What Are They and How Can You Avoid Them? appeared first on This That and The MBA.
