Most people have trouble avoiding overdraft fees. According to the Consumer Financial Protection Bureau, Americans pay over $17 billion each year in overdraft fees and nonsufficient funds fees combined due to overdraft fees and nonsufficient funds charges on their checking accounts. A financial coach at Lionhood Financial can prove to be an invaluable resource because overdraft fees are usually a result of poorly managed finances.

Whenever you make a debit card purchase or withdraw from an ATM without enough money in your checking account, your bank will charge you an overdraft fee. If you have an overdraft protection service with your bank, you'll be hit with this fee. It is still possible for the bank to allow you to conduct a transaction in spite of not having the necessary funds.

Essentially, the bank makes a loan to your account in the amount of the overdraft, putting your account in the red. The banks may charge hefty overdraft fees, which are referred to as overdraft costs.

Generally, an overdraft fee is fixed at $35 per transaction, plus the amount that has to be repaid to the bank, which is a significant amount if you have several overdrafts.

A positive note is that account holders should be able to avoid overdraft fees if they follow some simple strategies.

1. Don't let overdrafts protect your account

By telling you that they only have your best financial interests in mind, banks may be eager to enroll you in overdraft protection plans. The plans are not necessary for everyone, however, and they can be costly. The most important thing to remember is that overdraft protection is an option.

A debit purchase or an ATM withdrawal from an account with insufficient funds is declined if you do not have an overdraft protection plan.

2. Connect additional accounts to cover any shortfalls

You can avoid steep overdraft fees by using other methods. In some banks' overdraft protection plans, users can link a savings account or credit card to transfer funds to cover any shortfalls.

It doesn't necessarily come for free, though. An associated transfer fee may apply, and if a credit card is linked, interest can accrue on top of the transfer fee. However, this fee is usually much lower than the average overdraft fee.

3. Register for account alerts and monitor accounts regularly

Before banks opened at 8am, branch banking was only available in the morning. to 5 p.m. Weekends are over on weekdays. If you want to avoid overdraft or nonsufficient funds fees, it is essential to regularly monitor your account and your balance, whether you receive your monthly bank statements in the mail or bank online.

Keep a close eye on your debit card purchases, ATM withdrawals, written checks, and any automatic bill payments you've set up. Almost all banks offer low-balance alerts, which notify you of low balances via text message or email. You can literally access your finances with your fingertips since most major banks now offer mobile apps.

4. Create a buffer of available cash

If you can, keep extra money in your account to cover miscalculations, forgotten or delayed transactions, to protect against overdraft and nonsufficient funds fees. If you can manage it, maintaining your own personal minimum account balance is a good way to avoid most overdraft fees.

5. Understand your balance in relation to your purchases

Knowing your account balance is one thing, but knowing how your purchases impact your account balance is another. Different deduction methods are used for different transactions.

Final Thought

Overdraft fees don't have to be complicated to avoid. It is possible to achieve it regardless of the account balance or budget. Overdraft protection plans may be available from your bank, but make sure they actually protect you and your wallet. A financial coach at Lionhood Financial can help you adjust your behavior and avoid fees. Book a assessment today!

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