Avoiding the Cost of Overdraft Fees and Bounced Checks
According to the National Check Fraud Center, Americans bounce millions of checks and incur overdraft fees every year. Nearly 1.7 million checks bounced every day in 1995. That figure has dropped in recent years as more Americans rely on bank cards, but many people are simply incurring overdraft fees instead. You will need to be aware of the costs and take the necessary steps to avoid these fees and other risks.
What Can You Do to Avoid Bounced Checks or Overdraft Fees?
Consumers that are proactive about managing their money are least likely to bounce checks or overdraw their accounts. Here are some suggestions that will minimize the risk.
Get in the Habit of Writing Checks
A growing number of people prefer the convenience of swiping a bank card, but there are still plenty of reasons that checks are still necessary. One of the biggest benefits is that they discourage us from making impulse purchases.Â You can buy custom checks like cheetah spots and zebra stripes if you donâ€™t want to use the boring versions the bank offers.
Flora L Williams, author of The Shepherd’s Guide Through the Valley of Debt and Financial Change, encourages her readers to get in the habit of writing checks to avoid overspending. You are more likely to recognize the amount of money that you are spending when you have to write it down on a check, which may force you to reconsider making a purchase for something that you donâ€™t need.
Do Not Rely on Online Banking Balances
Most people have online bank accounts, which allow them to check their balances each month. Unfortunately, these balances donâ€™t reflect liabilities from outstanding checks. The only way to know your actual balance is to record all checks that you have written and deduct the balances. It is a good idea to keep a spreadsheet of all transactions that you have made with both your debit card and cash.
Create an Emergency Fund
While tracking expenditures and avoiding impulse purchases is important, it isnâ€™t the primary reason that people overdraw their accounts. Data from BankRate.com shows that one in four Americans donâ€™t have any emergency savings. A tire blowout or a trip to the emergency room could be all that it takes to wipe out the money they needed to pay their mortgage or utilities, which leaves them with an overdrawn account or bounced check.
It is a good idea to save enough money to cover at least six months of living expenses in case you face dire circumstances. This is one of the most overlooked tips to avoid fees of overdrawing your account or bouncing checks.