Knowing your bank account balance is an important part of financial planning and staying on top of your money. Knowing what happens when you overdraft your account can help avoid overspending or costly mistakes like hefty fees.
Being charged an overdraft
Banks charge overdraft fees because they want to make money. According to the Consumer Financial Protection Bureau, the average cost of an overdraft per transaction is $33.90, which can add up quickly when you’re paying for multiple daily transactions.
Overdrafts are a big source of income for banks because many people don’t realize that they’re paying for them until it’s too late or simply don’t care enough about their finances to avoid spending more money than they have in their accounts at any given time. However, it is possible to find a bank with no overdraft fees. According to the SoFi’s experts, “We built SoFi Checking and Savings to protect you from overdrafting, but on the off-chance it happens, you won’t get charged.”
If you haven’t set up alerts on your phone or received notifications via text message when your account balance dips below zero, you might get charged these fees without knowing what happened or how much money you lost, thanks to those charges.
Insufficient Funds Fee
You may be charged a fee for each transaction if you go over your account balance. This is known as an overdraft fee or NSF (non-sufficient funds) fee and can cost between $25 and $35 per incident. Sometimes it’s even more expensive! The amount of the overdraft charge depends on which bank you use and how long they choose to let your account remain in that state. If you make multiple small transactions during this time period, your bank can charge multiple fees—so watch out!
How to access your money
Avoiding overdraft fees and insufficient funds charges is simple.
- Don’t charge more than you can afford to spend: It’s important to know how much money you have so that if there isn’t enough for a transaction, it doesn’t go through and trigger an overdraft fee.
- Watch the balance in your account closely: You should be regularly checking the balance in your account online or via mobile banking apps so that you’re aware of any changes at all times—this way, if something happens (like a family member pays you back), there’s no need for worry because it won’t come as a surprise when they try to withdraw money from their account later on!
Account holders should be aware that some banks charge a fee for overdrafts, which can be costly.
You can set up a direct deposit or recurring transaction to avoid overdraft fees. You can also set up a recurring transfer or bill pay.
If you don’t do any of these things and use your debit card to make purchases, the merchant may decline the purchase because they don’t have enough funds in their account to cover it. This is known as “dipping into” or “bouncing” a check.
In short, overdrafts can be an important tool for account holders who need to access their money in emergency situations. But they can also be costly if used improperly. If you plan on using your overdrafts often or need to make sure that you never go into the red, choosing an account with a low limit on overdraft fees might be best. Pay attention to how much money is available in your account at all times, so there are no surprises!