Q: I've had a few overdrafts in my checking account, mostly because of things I buy on the fly with my debit card. Of course, the fees for those overdrafts make the problem even worse, so I'm trying to make it my New Year's resolution to avoid overdraft fees. Have you got any tips for how to do this?
A: Whether you measure them as a percentage of a typical checking account balance or compared to the size of most purchases, overdraft fees are excessive, and Americans pay way too many of them. Moebs $ervices, an economic research firm, estimates that Americans paid $35.4 billion in these fees in 2010. How can you avoid adding to this total in 2011? Here are a few things you can try:
- Keep a small account log with you. It doesn't have to be your complete check register, but just somewhere that you can record your purchases alongside a recently-updated account balance.
- Log your receipts at the end of each day. If you don't want to record your transactions when you are out and about, at least save your receipts and make it a habit to update your records at the end of each day.
- Don't leave home without a daily budget in mind. If you can check your balance electronically, do so before leaving home in the morning, and make a note of how much money you have available. Just be sure to account for any recent checks or other transactions that might not have been posted to the bank's records yet.
The ultimate solution is to opt out of your bank's overdraft protection program. Consumers have the right to do this, and if you can't seem to avoid overdrafting your checking account, this is a solution which would force more spending discipline on your part. It might be inconvenient at times, but the savings could be well worth it.
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