The usual idea when using debit cards is that when your account runs out of money, the transaction won’t push through. What many people don’t realize is that many banks have automatic debit overdraft coverage that lets a transaction push through even when there’s not enough money left in your savings account.
Unsuspecting debit card users can be shocked by debit card overdraft fees. What can you do to avoid this problem?
Turn the feature off – Request that the automatic debit card overdraft feature be turned off. And ask them about possible consequences when the bank agrees to action. Will the bank automatically cut off your debit card when you’re short on funds, or allow a bounced check to push through?
Maintain a buffer and set up alerts – Not all banks will let you turn off the debit card overdraft feature. But even then, you can always protect yourself with a buffer. Keep at least $1,000 stored in your account at all times. You can also visit your bank’s website and set up a text or email alert when your balance is running low.
Use a line of credit – You can also ask the bank to extend an overdraft “line of credit” (“overdraft protection”) instead. You’ll be paying 18 percent annually for whatever you borrowed to cover for the deficit in your savings account. This is better than paying $30 to $35 each time you overdraw.
Create a backup account – Set up a savings account in the same institution where you have a checking account, particularly if the bank provides an option to link the two. When your savings account runs dry, the checking account will simply cover for the shortage.
Find a new bank – There are banks that don’t have a debit card overdraft feature. You can open a new account there.
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