Dodge Annoying Overdraft Fees

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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.

Where to Get Free Checking

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.

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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.

Lisa has been the editor of Kiplinger Personal Finance since June 2023. Previously, she spent more than a decade reporting and writing for the magazine on a variety of topics, including credit, banking and retirement. She has shared her expertise as a guest on the Today Show, CNN, Fox, NPR, Cheddar and many other media outlets around the nation. Lisa graduated from Ball State University and received the school’s “Graduate of the Last Decade” award in 2014. A military spouse, she has moved around the U.S. and currently lives in the Philadelphia area with her husband and two sons.