How to avoid overdraft fees
Updated September 30, 2021

How to Avoid Overdraft Fees Every Month: 15 Simple Ways

Saving Money

We may receive a commission if you sign up or purchase through links on this page. Here's more information.

When you withdraw or spend more money than is in your bank account, your bank account will drop into the negative digits. If this happens, most banks will charge you a hefty overdraft fee.

Did You Know? Usually there is an initial fee of about $40. However, if you don’t deposit money into your account and let it sit with a negative balance, you could be charged a daily fee as well.

Ready to leave overdraft fees in behind you? Here are 15 easy ways you can get avoid an overdraft fee or get it waived by the bank.

1. Check Your Account Often

One of the best ways to avoid overdraft fees is to get into the habit of checking your account daily or a few times a week. New technology in banking has made this so simple. Most banks now offer an app that allows you to view your balance, and make transfers and payments from your phone.

Pro Tip: You can also check your balance online, by phone, or at ATMs. Also, keep in mind that most banks will charge you $2 or $2.50 every time if you use a different banks ATM.

Good to Know: Charges like these can add up surprisingly quickly and you could be spending $10-15 a month without even realizing it. Keeping a close eye on your spending and remembering how little monthly fees affect your budget will help you avoid dipping into your overdraft.

2. Keep a Cushion

Keeping at least $100 in your checking account at all times can help reduce your chances of getting hit by an overdraft fee. This cushion will help if you have a delayed deposit, but still have payments to make. It will also ensure that you have some extra money to rely on should you need to make an emergency purchase or payment.

Pro Tip: It doesn’t take more than a few cents to trigger an overdraft fee so keeping a cushion of cash in your checking account will help prevent an extravagant fee.

3. Try a Prepaid Debit Card

If you have a history of going into your overdraft, you might want to consider getting a prepaid debit card. Like with a regular debit card, you can use this card to make deposits and withdrawals, as well as make purchases. However, a prepaid debit card won’t be linked to your checking account and, as the name suggests, you load money onto the card before using it.

Good to Know: Instead of having overdraft fees, you might have to deal with a fee for declined transactions. Some people find these fees simpler to deal with because it’s easier to remember that you need to make a deposit when your card is declined.

Pro Tip: When choosing a prepaid debit card, look for one of the many providers that won’t charge you a monthly fee. Prepaid debit cards can help you learn how to avoid overdraft fees by holding you to a strict budget.

4. Joint Account? Communicate Frequently

If you’re wondering how to avoid overdraft fees after opening a joint account, the answer is communication. It’s one thing to stay on top of your own checking account, but it’s a whole other thing when you have a co-account holder.

What To Do Before

Before opening a joint account, it’s a very good idea to sit down and have a discussion about spending habits and organization styles. It can also help to establish spending limits. You want to make sure you both are on the same page before moving forward with the account. And after the account is opened?

Pro Tip: Keep in regular contact about purchases made through the checking account so that both parties know how much is in the account at all times.

5. Link your Savings and Checking Accounts

Most people will have their savings and checking accounts with the same bank. This makes it easy to link the two accounts together.

Doing so will allow the bank to transfer money from your savings account and put it into your checking account should you overspend. Unfortunately, this service typically comes with a fee. However, it likely won’t be as much as the $35 overdraft fee. Instead, you’ll pay a fixed administrative charge that is rarely more than $10. Once your accounts are linked, you will also be able to transfer money quickly between the accounts.

Good to Know: This is especially helpful if you have alerts set up to notify you when your balance reaches below a certain point. Utilizing online banking and linked accounts is a great way to remember how to avoid overdraft fees.

6. Use Direct Deposit

Having your paycheck directly deposited into your bank account is a great way to keep your checking account in the black. Even if you remember to quickly deposit paper paychecks into your account, this type of paycheck can still take longer to clear.

Good to Know: Remember that direct deposit works both ways. If you use direct deposit to pay your bills, you might forget when money leaves your account. That’s why it’s a good idea to keep checking your account or even mark your calendar for when payments are due.

Pro Tip: If you have a history of dropping into your overdraft, you might want to consider only having a direct deposit for your paycheck and continue to pay your bills manually.

7. Use Other Forms of Payment

Just learning how to avoid overdraft fees? Minimize the ways you use your checking account. For bigger day-to-day purchases, like fuel or a large food shop, you might want to switch to using your credit card instead.

Good to Know: While you should strive to pay your entire credit card bill by the end of the month if you are unable to, your interest will likely be far less than an overdraft fee. And for smaller items, use cash instead of your debit card.

Make Sure You Check Your Balance

When you withdraw cash from an ATM, you will also have the opportunity to view your balance. Taking a few extra moments to look at your balance and note the amount, can help you stay on top of your budget and ensures you only take out as much as you can afford. Limiting the ways you use your checking account can help you stay organized and less likely to spend what you don’t have.

8. Think Twice about Overdraft Protection

Overdraft protection is when a bank allows you to make a withdrawal or payment even when your account falls below zero. While this seems like an attractive idea, it’s actually a very thorny issue. That’s because overdraft protection programs are tied to those steep overdraft fees.

Choosing to cover your withdrawal is up to the bank’s discretion, which means they decide whether or not to let you go into your overdraft.

Good to Know: 2010 federal legislation requires banks to get your consent to register for this service. Most people choose to opt-in to overdraft protection to avoid the potential embarrassment of having their card declined. But think twice about this non-compulsory feature for your checking account. Read the fine print closely and make sure you know all about how the fees are structured.

9. But Do Use Overdraft Protection for your Savings Account

Unlike with your checking account, overdraft protection for your savings account can be a good, practical decision. Usually, this type of overdraft protection will come with an annual fee.

However, compared to how much overdraft protection for a checking account can cost, this is very affordable and easier to factor into your yearly budget. Another difference is that you are guaranteed protection. It isn’t left up to the bank’s discretion.

Pro Tip: As with any other service, remember to read the fine print before signing any contract as it could end up affecting your credit score if the account is linked to a credit card.

10. Turn on Alerts

Signing up for email or phone alerts is a great way to avoid overdraft fees. Your bank will send an automatic warning if your account dips below a certain amount. This will help you stay aware of your account balance. And if you’re keeping a cash cushion in your account, it will remind you when you need to deposit money into your account or slow down on your spending.

11. Stick to a Tight Budget

Making yourself a budget at the beginning of every month is a good way to not only curb your spending but also to make sure you always have enough money in your account. Some experts in personal finance suggest that you use the envelop system. This requires you to keep your cash organized in your wallet by category (i.e. one clip for food, one for gas, etc.).

Good to Know: The envelop system is a good visual aid because you can see how much money is left in each budget every time you open your wallet. It also means that you only withdraw cash once a month, making it easier to remember how much you’ve taken out.

Pro Tip: Making multiple trips to the ATM every week can result in withdrawing too much without even realizing. The major downside about the envelop system is that it mainly works with cash payments. If you make a lot of purchases online, it can be harder to remember how it fits into the budget. At the beginning of the month, consider making a separate category for online purchases and every time you buy something online, write it down. Already find yourself with an overdraft fee? Keep reading to learn our tips on how to get that fee waived.

12. Contact your Bank

As soon as you realize you have been charged an overdraft fee, contact your bank directly, either in-person or by phone. Direct contact will expedite the process of resolving the fee. If the initial reaction by the bank is the refusal to waive the fee, you can hang up and call again.

Pro Tip: A different bank representative might have a more lenient stance. Talking with the bank will also require persistence. They won’t want to immediately waive the fee so you should expect some back and forth during the telephone call.

Bonus: If you call right when your account dips below zero, you should ask your bank if the overdraft fee is charged immediately or if you have until the end of the working day to put money back into the account. Sometimes banks will also be willing to grant you a grace period, giving you some extra time to get the funds together and avoid the fee.

Click here to learn more about getting rid of your bank and credit fees.

13. Remind the Bank that You’re a Good Customer

You probably don’t want to rely on this tip if you have a habit of going into your overdraft or not making timely payments on loans. However, if you do have a good relationship and history with your bank, take the time to remind them of this.

Good to Know: Banks want to keep their loyal customers happy and are more likely to drop the fee if you point out how long you’ve used their services without going into your overdraft. And if you use the same bank for your mortgage or a large loan, they won’t want you to take your business elsewhere.

If you’re a good customer, chances are your bank is making money off you. Reminding them of this fact, or threatening to leave, can quickly prompt them to waive the overdraft fee.

14. Be Polite and Patient

When you’re talking with the bank representative, keep in mind that it is ultimately your fault that you went into your overdraft. If the bank waives the fee, they are doing you a favor and one that should never be expected. That means that you should refrain from getting upset or frustrated when asking for the fee to be waived.

Good to Know: Sometimes you just have to accept that you haven’t convinced the representative to drop the fee. That means accepting defeat and paying the fee.

Just remember that if you go into the conversation prepared and polite, you have a very good chance of convincing the bank to drop the charge!

15. Consider Switching Banks

If you think your bank is charging you too much for using your overdraft or you find yourself unhappy with the service they’re providing you, it might be time to switch. With a bit of research, you can find a bank that suits your financial needs and spending habits. Just don’t expect any bank to waive all your overdraft fees or not charge a monthly checking account fee.

Good to Know: You might also want to consider joining a credit union. Credit unions usually have a much lower minimum balance requirement, sometimes only a few dollars. This means that you can avoid monthly charges as well as hefty overdraft fees.

There will always be pros and cons to the bank you choose, but talking with representatives can help you get a feel for which bank is best for you.

Gotten your overdraft fee waived? Share your strategies on how to avoid overdraft fees!



Logan Allec, CPA

Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.

Back to top  
Notify of

Inline Feedbacks
View all comments