Have you ever avoided looking at your account balance? Does your stomach clench when you open your banking app? It doesn’t need to be like that. Learn these five steps and follow them to a day when you will no longer dread looking at your balance.
Overdraft Fees Are Expensive
Some people might ask why overdraft fees are so high and the answer is that the banks charge so much simply because they can. They rely on the shame factor to shut down complaints about high fees and it works very well. It is difficult to argue from a position of fault, whether real or implied.
Complaining about the fees won’t help you. The best defense against high overdraft fees is to stop allowing them into your life.
Get Rid of Overdraft Protection
In the words of Admiral Ackbar, “It’s a trap!” You need to opt out of overdraft protection today. Overdraft protection can send you spiraling into an inescapable cycle of debt as each ‘protected’ overdraft piles on fee after fee.
In the end, you’ll have been protected straight into insolvency. It is far better to have a purchase or even a bill payment denied than to have your bank account crumble to a negative balance. You can live without the purchase and work out arrangements for the bill, but you can never get rid of those fees once they have been charged.
Use Balance Alert Services
The movement to purely electronic banking services has offered us tremendous convenience, but it has a major drawback. When we left behind paper based banking we stopped carrying and using our paper ledgers. The end result is that we try to keep a running tally in our heads that is rarely accurate.
Balance alerts are a good hedge against the potential for overestimating how much money you have available. You can set the alert to suit your needs and have it warn you whenever your balance falls below a predetermined amount. This will keep you from attempting purchases that your plans or your bank account can’t support.
Connect Your Savings to Your Checking
Connecting your savings account to your checking account will allow your bank to draw from your savings. This is used to cover purchases that would otherwise cause an overdraft in your checking account. There are potential pitfalls to this setup which you need to keep in mind.
Make certain that your bank doesn’t charge a fee whenever you use this service. Switching one fee for another isn’t helpful and there are many banks available that do not charge these fees. You also need to be aware of and support your saving’s balance to make this service useful.
Keep a Cushion in Your Account
Decide on an account balance that you refuse to go under. Treat this number as zero in regard to your spending habits. If you can learn to treat this number as an unbreakable wall, then you will be prepared to handle unexpected expenses when they arrive.
This will be difficult in the beginning, but you will find that you will get more used to it as time goes on. Eventually, you will discover that the cushion is a great comfort and the thought of losing it has become unacceptable. Once you achieve this mindset, overdrafts will be a thing of the past.
Defeating the overdraft monster can seem an overwhelming task. As you can see, it is possible to do with just a few decisions and some minor modifications of your spending habits. If you find yourself tempted to break your new rules, just remember the damage that overdraft fees can cause to your finances and how hard you had to work to dig yourself out.
