What are overdraft fees and how can you avoid them?

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At some point in our lives many of us will need financial help. There is no shame in getting into tough times and something we will most likely all go through in our lives.

Whether this dips into an overdraft every now and then, or if you need a personal loan to cover major unexpected bills or home repairs. The most important thing you can do is stay calm and take the time to understand what you are getting yourself into. Financial literacy is the key to smart online banking.

What are overdraft fees?

Sometimes when banking online, diving into an overdraft is inevitable. We explain everything you need to know about an overdraft fee and how to avoid it.

Overdraft fees common questions

What are overdraft fees?Here are common questions about overdraft fees:

  • What is an overdraft fee? A bank fee is charged when a withdrawal from an individual’s bank account exceeds their available balance. The bank will charge such a fee to cover the cost of the transaction. Overdraft fees vary by financial institution and may apply to any transaction that exceeds the available balance (source).
  • Are there overdraft fees per day? Any transaction in which your available balance is overdrawn by more than $ 5 will typically be charged a fee of $ 35, regardless of whether that transaction is made by debit card, check, personal withdrawal, or any other electronic means (up to maximum of 5 fees per day). .
  • What if i don’t pay my overdraft fee? If you don’t add money to your bank account to pay your overdraft fees, your bank may close your account. You will also receive NSF fees if your balance is negative.
  • Can I transfer money from a Visa Gift Card to my bank account? Venmo allows you to add credit for Visa gift cards as long as the transfer is not blocked for fraud protection reasons. You can transfer the balance to your account after loading.

How do I avoid overdraft fees?

To avoid getting into an authorized or unauthorized overdraft, there are a few things you can do yourself:

  • Make sure to check your balance regularly. Make sure you don’t spend too much on unnecessary items
  • Download your bank’s app and set up mobile and online banking
  • Set up text notifications above a certain amount to avoid the red entirely
  • Set a budget to manage your own finances, make sure you don’t run into overdrafts for your usual monthly expenses, and try to make the necessary budget cuts. Lowering your weekly shopping budget by a few dollars or reducing the number of evenings or takeaways can have a massive impact.
  • Always open your bank letters. It’s so easy to get used to not reading your bank’s correspondence. However, they may write to notify you of changes to your account.
  • Make the most of your savings. If you have them and can afford to dive into them easily, in the long run it might be better to avoid fees and build them up again at a later date.
  • Change account completely. Different banks offer different interest rates and offers. By switching, you can take advantage of a whole world of fee savings (like these savings accounts) as well as some interesting additional extras!

How much are overdraft fees?

Here is an example of the overdraft fees charged by some popular financial institutions:

How to get a waiver of overdraft fees

If you are charged an overdraft fee, you may have several options. It doesn’t hurt to try to waive the fee by calling the bank to apply for the exemption or using apps like Cushion that will process bank fee refunds on your behalf. You can also opt for automatic overdraft protection, if your bank provides it, so you no longer pay those high fees.

Authorized overdraft vs. unauthorized overdraft

An overdraft is a loan agreement from your bank or building society that extends your credit to your checking account. Depending on your bank, this will depend on the overdraft agreement. However, most charge a set fee for daily use or a set fee each time money is borrowed.

The most important thing you need to know is whether the overdraft was agreed with the bank in advance or if it is an unauthorized overdraft.

There are fees for both. However, if you dive into an unauthorized overdraft facility, it could incur higher fees and potentially pay out much more than you originally needed to borrow.

Authorized Overdrafts

An authorized overdraft or an arranged overdraft is a pre-arranged arrangement that you have made with your bank. For many people, this is offered when they open a new checking account. Most banks also allow you to extend this over time. If you’ve been with your bank for a while but don’t have an authorized overdraft, you can check online or check with your local branch. Most banks offer the service.

Unauthorized overdrafts

An unauthorized overdraft or an unplanned overdraft is when you have transferred the funds to your checking account without first consulting your bank. Some banks don’t charge any fees if you might invest $ 5 or $ 10 in an unauthorized overdraft. However, you need to check with your account provider. Also, if you already have an agreed overdraft but are exceeding the agreement, this may also be classified as an unauthorized overdraft as you are exceeding the previously agreed amount.

The bottom line

Sometimes it’s inevitable to dive into an overdraft fee. The best thing to do is make sure you are prepared. You can also look for the best checking accounts that don’t charge overdraft fees so that you are protected from those pesky bank charges.

The best apps to save real money

We talk a lot on the phone, don’t we? Wouldn’t it make sense to save money with the best money-saving apps?

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