Making a purchase that costs more than the amount of money you have in the bank could send your account into a negative balance. The bank pays the difference when it processes the transaction, but charges you a fee for overdrawing your account plus you still need to pay the balance remaining to get your account back to the positive.
For example, if you had $20 in your account and paid $25 for gas with your debit card, you will overdraw your account by $5. Your bank will pay the gas station the total amount, adding $5 in overdraft to the $20 in your account. You will then have to repay that $5, plus whatever overdraft fee the bank charges. To avoid these fees and the frustrations of overdrawing your account, use the helpful tips below.
How much can overdraft fees cost?
A 2021 study of checking accounts and ATM fees found that the average overdraft fee is $33.58. This amount is currently the highest it’s been in the 23 years they’ve conducted the study. The actual amount you will pay in fees, depends on your bank. If you continue to make transactions without adding more money to your account after overdrawing, you will also have to pay a fee for each overdrafted transaction. Many banks limit the number of overdrafts you can make and will deny transactions made, once you hit the limit threshold.
4 ways to avoid overdrawing your account
1. Don’t use overdraft coverage
Many banks allow you to opt-out of overdraft coverage. Rather than paying your negative balance, the bank will decline any debit card charges that exceed the amount in your account. Though it may be embarrassing when your card declines, you will avoid any overdraft fees. You can typically change this setting with help from a bank representative.
2. Monitor your bank balances
Knowing what you can afford is the easiest way to avoid overdrawing your account. Get in the habit of checking your balance every day or so to know where you stand. You don’t want to be caught by surprise if you forget about a bill payment or transaction. You can also set low-balance alerts that let you know when your account has fallen below a certain amount. When you know how much money you can spend at all times, you can make smarter spending decisions.
3. Save for emergencies
If you have unexpected expenses that happen, but there isn’t enough money in your account to meet the charges, you will need to find another way to add cash to your account. Hopefully you have some savings to cover the expenses. Sometimes, though not always, it may be less costly to borrow money through a short-term loan rather than incur multiple overdraft fees. If after you investigate, you think that you would save money by avoiding multiple overdraft fees, then consider applying at ACE Cash Express for a payday or installment loan.1 Try and save some money each paycheck in case you have unexpected bills and to avoid incurring overdraft fees or taking loans.
4. Use a prepaid debit card
Prepaid debit cards can help by only approving transactions within the limits of your balance. You can generally use a prepaid debit card without worrying about overdraft fees, but you should check your prepaid debit card terms and conditions. Find out more about a prepaid debit card with the ACE Elite® Visa® Prepaid Debit Card here, which does not offer an overdraft feature.
1. All loans subject to approval pursuant to standard underwriting criteria. Rates and terms will vary depending upon the state where you reside. Not all consumers will qualify for a loan or for the maximum loan amount. Terms and conditions apply. Loans should be used for short-term financial needs only, and not as a long-term solution. Customers with credit difficulties should seek credit counseling. Installment loans are intended for customers who need more time to pay off their loan than provided by a single-payment payday loan. Individual payment amounts for an installment loan are smaller when compared to the single-payment payday loan for the same loan amount. The total sum of payments for an installment loan will be higher than a single-payment payday loan if you pay off the installment loan according to the payment schedule set forth in the associated loan agreement. For online loans, approval and funding may require verification of application information. Depending on ability to verify this information, loan funding may be extended up to two days. In-store cash pickup of online loans is subject to approval pursuant to standard underwriting criteria and only available at ACE Cash Express locations in the state where you originated your loan. In-store cash pickup of online loans not available in all states. In-store cash pickup of online loans requires valid, non-temporary government-issued identification. Online and in-store loans not available in all states. Populus Financial Group, Inc. is licensed by the Department of Financial Protection and Innovation pursuant to Financial Code Section 23005(a) of the California Deferred Deposit Transaction Law. Loans in Minnesota made by ACE Minnesota Corp. Populus Financial Group, Inc., 300 E. John Carpenter Fwy, Ste. 900, Irving, Texas, 75062, ST.760164.000. Loans in Texas arranged by ACE Credit Access LLC and made by, and subject to the approval of, an unaffiliated third-party lender. Populus Financial Group, Inc. is licensed by the Virginia State Corporation Commission, PL-115.