spending

Dodge Annoying Overdraft Fees

Use these strategies to avoid dipping below your checking account balance.

Many bank customers who inadvertently overdraw their checking accounts still feel the bite of hefty fees. Under federal law, your bank may not enroll you automatically in its overdraft coverage program, but it can ask you to opt in. If you do, the bank pays the excess charges but then hits you with a stiff fee. The Consumer Financial Protection Bureau found that the median charge at a large bank is $34, even though most offending debit card transactions are for $24 or less. With or without overdraft protection, the bank may bounce a check or automated payment.

Although small banks frequently offer low-fee checking accounts, they are often guilty of using overdraft charges as moneymakers. Many still process a single day’s transactions from largest to smallest, making it more likely you’ll dip below your account balance, according to a study from Moebs Services and the Wall Street Journal.

A better way to go: Link your checking account to a savings account or line of credit from which the bank can transfer funds automatically in case you slip up. (Watch for any fees you may incur on the linked account.) The bank will likely transfer money to your account at the end of the day and charge a single fee of at least $10.

To help avoid spending more than you have in your checking account, sign up for e-mail or text-message alerts to notify you when your balance hits a certain threshold -- say, $50. And if you (or a kid learning the basics of money management) still have trouble staying within the bounds of your bank account, you might benefit from using a low-fee prepaid debit card, such as Bluebird or Serve from American Express.

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