How to Avoid NSF and Overdraft Fees
As most of us know or have heard, money is no longer a fixed amount of liquidity that is bound to the limits of deposits. This digitalized era has also allowed the possibility to spend over our limits or over the amount of money we have in our accounts. As appealing as this practice might seem, do not be fooled, there are several fees associated with this practice.
NSF (non-sufficient funds) Fees
Most banks allow their customers to withdraw more money than their accounts actually hold, this is an overdraft. When you overdraw, your account balance becomes negative, but of course, this practice is not free of charge. In fact, banks often charge up to 45$ in overdraft fees or sometimes, a daily fee until your account is back in the positive. Also, not having enough money in your account can lead to bounced cheques and NSF charges.
Here are some tips to avoid situations where overdraft is your only option.
Tips to Avoid Overdraft Fees or NSF Charges
Anticipating your next payment is essential to avoiding overdraft fees. Knowing exactly when your next payment is due and how much you owe, will allow you to be as prepared as possible and therefore have the right amount in your account at the right time. Do not neglect the various fees associated with your account when preparing for your next payment. Keep up to date as per the amount available and the cost of maintaining your account.
12 Rules for Personal Finance. Read it here.
Setting up automatic payments is one of the best ways you can stay organized. Writing cheques to cover all your bills and monthly expenses can often become confusing and can even lead to mistakes which then might result in overdraft charges. Automatic payments allow you to better anticipate how much will be taken from your account and on what date. Setting up theses automatic payments is easy and can typically be done through your bank’s online banking portal.
Stay up to Date
It’s important to review your account’s statements, this will help you better understand where your money goes. Also, verifying that they aren’t any hidden fees being applied to your account each month. We recommend that you maintain a monthly check-in with your account; a daily check-in is also a great idea as it will help you maintain a realistic perceptive on your consumption possibilities.
Maintaining a Cushion
Anticipating the unexpected can help avoid ridiculous fees. Maintaining a certain amount in your account on a monthly basis will help you avoid overdraft fees and will help you manage your finances.
Learn about how an emergency fund can help you maintain a financial cushion.
Signing up for online alerts can help you keep track of your account balance and make sure that it never falls too low. Again organization is the key to avoiding unwanted fees.
Depending on your bank and how you manage your accounts and finances, overdraft protection may be either a good thing or a bad thing. Some banks offer decreased overdraft charges for no additional fees. If your bank offers this promotion you may want to consider adding this type of protection to your account. On the other hand, your bank may be charging you for overdraft protection.
Use Your Accounts Wisely
Some purchases can lead to holds being placed on certain blocks of funds in your account. Typically this happens when you use your debit card to pay for gas, a hotel or when you rent a vehicle. These holds will affect the amount of money that is available for you to spend. For example, if you have $300 in your account and you use your debit card to rent a car. The car rental company will place a hold on $200 to pay for the rental. The money hasn’t actually left your account yet and you got to purchase something else for $150, your account may become overdrawn as in reality you only have $100 in your account that is available to spend.
These tips should help you have a better understanding of your expenses, income, and spending habits. Preparing a budget can also help you avoid any overdraft fees or NSF charges (learn how to budget here). Always make sure to expect the unexpected and be as prepared as possible.