You Can’t Afford Not to Use This Bank Account Feature

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Overdrafting your checking account is the worst. Read on to learn how you can keep it from happening to you. 

Before the days of online banking, if you wanted to check your bank account balance, you needed to visit a branch or call your bank’s automated customer service line. Now, you can check up on your money anytime you want by way of your bank’s mobile app or website.

This is tremendously convenient, and surely has cut down on overdrafts — after all, it’s harder to accidentally overspend your checking account balance if you can check before you make a purchase to ensure you have enough cash. That said, we’re all human, and sometimes a bill payment goes through at exactly the wrong moment and you find yourself slapped with a fee for nonsufficient funds (NSF). Thankfully, there’s another 21st-century banking innovation that can help.

Opt in for low balance alerts

One of the best things about that banking app is the ability to set up various alerts for different circumstances with your account. You can enable alerts for unusual activity or when you receive a direct deposit paycheck. And you can also set up one that lets you know when your account balance falls below a certain dollar amount.

I’ve had this one configured on my own checking account for years — I get notified when my balance is under $100. I used to receive an alert much more frequently when I was still living paycheck to paycheck, but even though I improved my financial circumstances, I’ve left the alert on, because you never know what could happen.

No matter the state of your personal finances, it’s a good idea to set up these alerts with your bank. You don’t want to incur an NSF fee — these can cost upward of $35 each, and while the Consumer Financial Protection Bureau reports that bank revenue from NSF fees has fallen, banks still raked in $7.7 billion from them in 2022. Plus, if your payment to a third party (such as a creditor or utility company) bounces, you could also be hit with late fees and possibly even a ding to your credit score. Overdrafting your bank account is one of those occurrences that can snowball into a much larger problem for folks who don’t have much financial wiggle room to begin with.

What else can you do to prevent and mitigate overdrafts?

An ounce of prevention is often worth a pound of cure when it comes to your finances, and this includes overdrafts. Setting up low balance alerts can help, and here are a few other moves to make:

Set up overdraft protection

To give yourself an extra layer of protection, you can also set up overdraft protection with your bank. This is when you link another account (perhaps a savings account?), a credit card, or a line of credit to your checking account. If you overspend your balance, money will be sent from the other account to cover you. This isn’t free, but the charge for an incident will be less than an NSF fee.

Leave a buffer

My own buffer has grown recently, but I used to make a valiant effort to leave $100-$200 extra in my checking account, even in my days of shakier finances. These days, that number is $500-$1,000, and it’s worth missing out on the interest I’d earn by putting that extra into savings for the peace of mind it gives me.

Switch banks

Some major banks have lowered or eliminated NSF fees altogether in the last few years. So if you’re still banking somewhere that charges these fees, now could be a great time jump ship. It’s worth researching the fee schedule of any bank you’re considering opening an account with.

Overdraft problems could become a thing of the past, but with banks still making money from charging fees for overdrafts, it’s worth making the moves above to protect yourself and your finances.

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