How to avoid overdraft fees at your bank

At Astra, we spend a lot of time thinking about overdraft fees. They can show up on your account even if you are really careful about not overspending and they can be charged multiple times on the same account on the same day!

There are some things that you can do to avoid (and resolve) overdrafts and their associated fees. These are the Astra teams best ideas about dodging an overdraft:

Knowledge is power - Know your bank balances

One of the most simple ways to avoid an overdraft is to keep a close eye on your bank accounts. We don’t mean that you should be refreshing your browser to see if your bank balance has changed by the minute, but it’s good practice to know your balance within a certain figure, especially if you know a big expense like a rent payment is due. Checking your balances can also help you identity fraud and stop it before it becomes a real problem. Your bank should let you set up recurring balance alerts so that you can know your balance on a recurring basis without having to log into your account or their app, but if they don’t we also provide balance notifications through our application.

Don’t sign up for Overdraft Coverage

Although when you are talking with a banker at a branch, it might sound like Overdraft Coverage on your checking account is required, legally it is optional (per Congress). By enabling Overdraft Coverage at your bank, you are allowing them to post charges on your account that will put it in overdraft status – and charge you the associated fee. If you opt-out of getting Overdraft Coverage, then if you try and spend more money than you have in that account (in most circumstances), the transaction will be declined, which can be inconvenient, but in the long term, it can be a far cheaper option.

Be your own Overdraft Protection

Depending on the bank that you use, you may be able to utilize an Overdraft Protection Plan, where you link another account to your checking account so that your bank can automatically cover your possible overdrafts. Everyone should try and keep a separate savings account for emergencies, and using it as the back up for your regular checking account can make that account even more useful. If you are interested in how to get started with a savings account and why they are essential – check out our savings vs checking article. Be sure and get the details of how your bank organizes overdraft protection as some charge for the covering transfers. If your bank does, you might want to find another bank.

Keep an Emergency Fund...inside your checking account

Although we highly recommend that at a minimum you have both a savings and a checking account, keeping an emergency fund INSIDE your checking account can prevent the accidental overdraft and the associated fees. A normal checking account is just one big bucket where you place your money. Ideally, instead of just having one big bucket, you could have several smaller buckets - buckets with jobs like “Rent” and “Groceries” and event “Emergency.” That way even though all of your money is still together and accessible at the same bank, you can quickly see that indeed your rent is covered because those partitioned funds are still there! We thought this would be a useful feature so the team at Astra actually built this functionality into our mobile application. You can now divide your existing accounts into as many sub-accounts as you like and if you set one up called “Overdraft Protection” you can act like your own financial back-up - keeping those funds at the ready just in case something you don’t anticipate hits your account.

Automatic account refills

Checking your account balances isn’t that difficult but even the most diligent bank customer can miss a charge and overdraw their account - even when they have other funds sitting in other accounts - maybe even at the same bank? Wouldn’t it be cool if there was a robot whose only job was to look at your account balances and if one of your accounts is lower than a certain amount it would just transfer funds in from a different account? Yeah, we thought so too so we built it! The Refill routine accessible via the Astra mobile app lets you set a minimum balance for any of your connected accounts, and then specify a backup account and a transfer amount. If you have an expenditure on your main account that drops your balance below that threshold, the routine will grab some funds from an account you specify and will push it back to your main account. The best part is that it’s all automatic - just setup the routine once and as long as there are some funds in your backup account it will always be waiting and watching your main account to make sure it’s balance is exactly where it should be. It’s that easy.

Overdrafts can be a drag on your finances, but with a little diligence and some automation, you can definitely minimize your chances of having one. And if all else fails and you do get an overdraft charge, make sure and call or visit your bank to see if you might be able to get a refund - it’s much more common than you might think!