We’ve all run into this at one time or another- well, most of us. You know you’ll get paid tomorrow and you know that you’re a little low on cash in your bank account, but it’s not dangerously low and you have your debit card on you. You decide to go ahead and buy that latte you wanted while out on your lunch. The next day, you check into your bank account to make sure your banking and personal finances are in order and there it is- an overdraft fee. Maybe a check had cleared that you weren’t expecting to clear so quickly; maybe you just failed to budget correctly. At any rate, that $3-$4 latte may have ended up costing you $30 or more.
Here are some tips and tricks to avoiding overdraft fees on debit cards. They were gleaned from hard experience with my personal banking account, so I hope they’ll pay out well for you.
Keep a Budget and Stick to It
A debit card is not a credit card, though it can be used as one. If you are debiting, you need to make sure each day that you are keeping a record of all the money coming in, all the money going out, and any money that has been paid out but has not exited your bank account yet. That includes online payments and checks. I use an online spreadsheet and make sure I highlight all money that hasn’t been deducted yet.
Get Overdraft Protection
Most banks offer overdraft protection for debit cards. It usually requires a credit check, as they are often considered a line of credit. For that reason, it may not be for everyone. Personally, I think it’s better to distinguish between actual credit and debit cards. That way you aren’t building debt with your every day personal finances.
Use Cash or Credit
Debit cards are fine if you’re good with a budget and ideal for online payments for the same purpose. But if you aren’t sure whether you have the money to spend or not, it’s best to always use cash. By the same token, if you are someone who pays off all of their credit debt monthly, it would be okay to use a credit card if you are a little uncertain about your immediate cash flow.
Keeping a great credit rating and avoiding overdraft fees is an important skill for any adult or young adult. The trick to staying financially sound is to exercise discipline and good judgment.