How to Avoid Credit Card Overdraft Fees

Filed Under Credit Cards

Oh those credit card overdraft fees. You can’t help but love them (and by “love them” I mean hate them with a passion). They come like uninvited guests when you least expect it and like those guests, they leave a mark. How in the world can you protect yourself against them?

Well, the most bullet-proof plan would be to have no credit cards at all – not as far out of the question as you may think. But it’s probably not a realistic target to shoot for right out of the box. Though, it would make an excellent long-term goal. After all, if you don’t have a credit card account, there’s no balance to exceed and hence no credit card fees that can be levied. But let’s put that on the back-burner.

The single next best protection you can afford yourself is to develop a disciplined approach to monitoring your balance and spending. It doesn’t have to be elaborate but it does have to be consistent. That’s because overdraft fees change, conditions change, in fact lots of things change when it comes to your credit card bills and your statement. If you aren’t consistent in your monitoring, you’ll miss something and that something will probably end up costing you dough. Let me give you an example.

A few years ago my wife and I were pretty laissez-faire about checking our bank account balances and credit card statements. We thought glancing at our statements once-a-month was enough. Bank fees didn’t worry us. Then in early January my wife carefully looked at our latest statement and found that we’d been hit with over $300.00 in bank overdraft fees in the month of December. She was shocked; I was shocked; the dog was shocked. More importantly though my wife swore a holy vow to never let that happen again.

Since that time she’s religiously checked our balances every morning with her coffee and has our bank’s customer service number on speed-dial because as soon as she sees anything that’s the least bit hinky, she rings them right up. Pity the fool that has to take that call! The upshot is that we haven’t had a single overdraft fee or charge since that January because she knows when we’re approaching a limit way before it happens, and we do something about it.

It almost goes without saying (but I’ll say it anyway) that you have to also have the discipline to live within your means if you want to avoid overdrafts. That means absolutely, positively controlling or outright stopping your credit card spending (we’ve now stopped ours and just use prepaid debit cards). You can’t let your balance creep too close to the limit because banks and credit card companies have a funny ability to find a way to push you over the edge and into overdraft land.

For instance, banks will tend to process any debits you have on a particular day before they’ll process any credits. That means if your deposits and charges line up right you can slip over-the-limit temporarily (just seconds really) and still incur an overdraft fee. Nice huh?

Also, banks like to order your charges highest to lowest when they’re doing the processing so once you cross the overdraft line with a larger charge, every subsequent smaller charge will incur another bank overdraft fee. So if your last charge in that string of charges turned out to be a fast-food burger it could turn out to be a $39.00 fast-food burger.

Congress has spoken and banks have had their hands slapped when it comes to their credit card billing practices. And we now have a modicum of credit card relief. But rest assured. There are conference rooms all across America where new ways of calculating and new ways of disclosing are being developed. Sooner or later there will be more questionable techniques that add to the bank’s bottom line at the expense of yours.

That’s why you’ve got to, got to, got to watch your money and credit like a hungry hawk watches the earth as it flies. No one else will care about your cash as much as you do so no one else will do as good a job. Take your own vow and make the last overdraft fee you received, the last overdraft fee received – period!

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bank overdraft fees, credit card fees, credit card overdraft fees, overdraft fee, overdraft fees

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