Tips to stay away from overdraft fees
One thing a lot of college students get into is debt. And one easy way to cut some of that out is to not get slammed with overdraft fees. They occur when you spend more money than you have in your account and they’re designed to benefit the bank.
Let’s say you have $200 in your checking account. You go get gas and spend $40, then you go to the grocery store, spend $67, and on the way to the mall, you stop and get ice cream, then spend $190 shopping. Most banks post the most expensive item first, even though it didn’t come first, so instead of getting one overdraft fee, you’ll get three. They do this for “your protection to make sure mortgage payments get posted before luxuries like movie rentals.
Unfortunately, it’s not designed to help the consumer so some tips I have for you are to always know what’s in your bank account.
Keep track, whether it’s in a check register, in a spreadsheet or writing it on a piece of paper.
Setup overdraft protection. Most banks allow this, although some only let you link to other accounts with them, which isn’t always helpful. Some banks will even give you a small line of credit that has a reasonable interest rate.
Keep a little extra padding in your checking account (if possible, I know living on a budget doesn’t always allow for this) that way if anything comes up, you’ll be semi-prepared.
Make purchases on a credit card and pay the bill off at the end of the month when it comes. If your limit is low and you’re likely to go over, this isn’t the best option, although my student credit card only charges me a higher interest rate if I go over my balance. It’s good to know the policies.
Also, some banks, especially if you have a student checking account, will be forgiving if it’s a first or even second offense. Simply go to a local branch and ask politely. Bankers will usually forgive at least one of the fees. If your parents have large sums of money in the accounts, that can also be used as leverage if necessary (don’t always recommend it though, mostly on a bank error.)
If you get a lot of financial aid money, sticking it into a high-yield savings account when you don’t need it can help build up some extra money. A large sum like student loan refunds can earn enough in a semester to pay for an entire set of books at 5%, but I only suggest this if you’re better with money and don’t go over budget very often. Also, getting an account with easy, fast and free online transfers is a good idea if you’re going this route.