$31 million.
That’s how much money financial institutions like banks and credit unions reported earning off bank overdraft fees in 2020. Yes, bank overdraft fees – you know, that unnecessary fee that you might get socked with due to not knowing just how much is in your bank account at the time. Furthermore, about one of every 11 Americans is believed to incur more than $350 per year in these overdraft fees. We’re not sure about you, but there are a lot of things that we’d rather be doing with $350 than paying a largely avoidable fee to our bank.
But the truth of the matter is that overdraft fees are a real thing – and they’re only getting more expensive. In 2021, overage fees – or insufficient fund fees if you really want to get fancy – clocked in at an average $33.58. That’s a record – more than a dime higher than last year and nearly a quarter more than 2 years ago. And banks continue to raise these fees for a few reasons. One, they know that they’re going to make money off of them. And two, bankers are always serious about ways to make more money. But with a combined $31 million each year, can you blame them? The bigger problem seems to be that people keep mismanaging their money.
The good news is that overage fees are 100 percent preventable. In this post, we’ll take a look at some strategies to implement to avoid them:
Know Your Balance
It seems like an easy solution, right? But overdraft fees wouldn’t occur if people were more in sync with their account balances. It might take a few minutes, but just pull up your phone app and do a quick balance check before you make any withdrawal or before any automatic transfers are set to take place. That extra few minutes could save you $30 or more in fees.
Put Protections in Place
Many banks these days offer protections to help prevent you from overdrafting accounts. For example, one thing you might be able to do is link a savings account to feed into your main account that can cover you if you overdraw. You may still incur a transfer fee, but that will cost significantly less than an overdraft fee. Many banks will also allow you to set up alerts that notify you when an account balance has dipped below a certain threshold.
Call the Bank
Did you get socked with an overdraft fee? It can’t hurt to contact your bank or credit union, explain the situation and see if you can get the fee either reversed or reduced. While it might not work all the time, remember that you are the customer and your bank needs people like you in order to function. The worst that your bank can say is “no.”