If the bank receives a check or automatic payment and you don't have enough money in your account to cover the transaction, you could incur an overdraft fee. In some cases, the bank may even deny the transaction, and you may face additional fees or issues from the vendor.
Dealing with overdrafts can be a pain. But if you manage your checking account carefully, you can minimize this risk. Keep these tips in mind.
1. Balance Your Checkbook
Don't just write checks and hope for the best. Instead, balance your checkbook. Every time, you write a check or pay for something with your card, write down the transaction and make sure you have money to cover it. Then, at the end of every month, reconcile your bank statement with your personal records.
2. Carefully Track Recurring Payments
Recurring payments can sneak up on you. You may think your account is fine, but then, an automatic payment you forgot about hits your account and overdraws it. To protect yourself, only use automatic payments sparingly. Write them all down and make sure that you're prepared for them to hit your account.
3. Disconnect Your Bank Account From Shared Consumer Accounts
When multiple people have access to your bank account, it can be impossible to track everything. For instance, if your bank account is connected to an online store that your whole family orders from or if it's connected to your children's video game consoles, you will almost undoubtedly end up paying for a purchase you weren't expecting.
To reduce the risk of overdrawing your account, consider disconnecting your bank account from shared apps or programs. Instead, consider buying credits or store gift cards upfront. Then, your family still has the ability to make purchases, but you don't have to worry about being surprised by an expected purchase.
4. Set Up Direct Deposit for Your Paycheck
Direct deposit gets your paycheck in the bank as fast as possible, and that also helps to protect you against the risk of an overdraft. If your employer doesn't offer direct deposit, see if your bank has an app that allows you to deposit the check quickly and easily without going to the branch.
5. Choose a Bank With Low Fees
Mistakes can happen. Occasionally, despite your best efforts, you may end up facing an overdraft fee. To protect your assets, choose a bank with low fees.
For more information about checking account benefits and options, contact a local financial institution.