How can I avoid debit card overdrafts?

There are alternatives to debit card overdraft. If you have a savings account at the same bank or credit union as your checking account, most banks and credit unions will allow you to link the two accounts. This way, if you overdraw your checking account, the bank or credit union will transfer money from your savings account to cover the overdraft. There usually is a fee charged when this occurs, but it is generally less than an overdraft fee.

Many banks and credit unions also offer an overdraft line of credit to consumers who qualify for such credit. If you qualify and overdraw your checking account, the overdraft will be covered by the line of credit. In essence, this gives you the ability to borrow money to cover an overdraft. There usually is a fee charged when this occurs. In addition, you will be charged interest on the amount you borrow to cover the overdraft. That fee and the interest charged are usually lower than the fee charged per overdrawn item in connection with a bank or credit union’s standard overdraft practices.

To reduce all overdraft-related fees, you should always track your balance as carefully as you can. It may be possible to sign up for low balance alerts through your bank or other service providers. These alerts can help you know when you are at risk of overdrawing your account.

If you have regular electronic transfers, such as mortgage payments or utility bills, make sure you know how much they will be and on what day they occur so you can ensure you have enough money in your account.