One of the main things you always need to check before you open a bank account is the fees. Especially overdraft fees! These probably are the most expensive charges you may face, so check how to avoid them!
Overdraft fees can be the most expensive charges you may face when you have a bank account. In order to learn how to avoid them, you'll need to understand how they work.
Here's a guide that can help you learn more about overdraft fees.
Defining overdraft fees
Let's define these fees first! An overdraft fee is what your bank charges you when you make a transaction (online payments, checks, purchases or ATM withdrawals, among others) that exceeds your balance in your account.
Whenever this happens, the bank agrees to grant you the amount of money you lack from your account, but it will also charge you fees for this.
If you are wondering about the amount of the fee, it will basically depend on the bank's overdraft policy. However, there are mainly four categories of fees:
- Regular overdraft fees: The usual fee is $34, though it can vary depending on the bank. Bear in mind that overdraft fees can accumulate in your account, and that may complicate your budget!
- Returned item fees: There are some occasions in which the bank may choose not to cover the amount you lack. In this case, these types of fees will be charged, instead of the regular overdraft fee.
- Overdraft protection fees: This is a benefit offered by the banks to cut down the costs of overdraft fees. To receive this service you will need to opt-in before you use it. However, you should know that the bank will still charge you (less) for convenience.
- Extended overdraft fees: This fee will be applied when you don't get your account back on track in a determined period of time. It can either be a one-time fee or a daily o weekly fee until you solve the debt.
How to avoid overdraft fees
The best and most obvious way to avoid them is to remember the amount of money you have in your account and don't spend more than that.
You can also opt-in for the protection overdraft fee, but bear in mind that this will only help reduce the amount to pay.