Checking overdrafts, can wipe out a budget in no time. When you write a check or checks and there's not enough money in the bank to cover them, your bank either draws from your overdraft protection to cover the checks or pays the checks, sending your account into a negative balance. Having an overdraft account to draw from is a smart way to protect your money. When you don't have overdraft protection is when you have a real problem on your hand. If you overdraw your account without overdraft protection the bank charges overdrafts fees for each check that doesn't clear. You may also end up with returned check fees from wherever you wrote the check in the first place. These fees usually start at twenty-five dollars and go up from there. It's smart to stay on top of your checking account balances to avoid checking overdrafts.
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The main way to avoid checking overdrafts is to keep your checking account balanced. That means recording every expenditure and keeping a current running balance. That can be tough in the rat race that we live in but that just means that you have to slow down long enough to protect your money. Take your monthly bank statement and sit down and reconcile your checkbook with the statement. You may even find mistakes that your bank makes.
Go easy with the debit card to avoid checking overdrafts. It's so easy to whip out a debit card to pay for everything these days. If you use the debit card and forget to record the transaction in your checkbook register it puts you at risk overdrawing your account. There are times like when you use your debit card at a drive through window at a restaurant and it's not practical to record the transaction. This is when you have to be disciplined enough to keep the receipt and record the transaction later. Don't make a habit of doing it later because if you don't get around to it ASAP it probably won't get done.
Paying cash for as much as possible may help you avoid checking overdrafts. You could try using the cash envelope system to make payments from. To use the cash envelope system, determine how much end for each category in your budget and put that amount in an envelope and label the envelope for each account. You can even have envelopes for gas and an allowance. Pay your bills from the envelopes and when an envelope gets emptied you obviously can't spend anymore from it. No overdraft.
Paying off any debt will reduce the amount of checks you need to write and helps avoid checking overdrafts. Debt can eat up your money but checking overdrafts on top of your debt devours your money. It may not be possible to pay off your debt but doing your best to reduce it can help avoid checking overdraft fees. Remember that debt isn't the real problem when it comes to checking overdrafts. The real problem checking overdrafts is managing your checking account.
Minimizing debit card usage, paying cash and paying off debt are all great ways to minimize overdraft fees but they're no substitute for keeping your checkbook balanced. That's hard if you're not used to doing it or if you don't know how to do it. If you don't know how the instructions are usually on the back of the bank statement. Your bank will be glad to help you with this. It's your money. Keep more of it by using a disciplined approach to avoid checking overdrafts.