Debit cards make shopping easy, but you want to avoid overdraft fees on your statement at the end of the month. There are pitfalls to not properly logging your spending, which can lead to whopping overdraft fees.
Debit cards contain the same traps as credit cards when it comes to overdraft fees. You can easily lose track of your chequebook balance. It only takes one mistake to cause an overdraft fee to be applied to your account.
Here are five ways to arm yourself against debit card overdraft fees.
1. Record every transaction. Remember when you had your first chequing account and the teller gave you a chequebook where you could record your deposits and make a record of cheques written? Now is the time to get back to banking basics. Use a little notebook or cell-phone application to record every transaction you make.
2. Sign up for overdraft-fee protection. In Canada, it’s not automatic when you open a bank account, so don’t test it out by spending more than you have with your debit card. Overdraft-fee protection is offered at a lower rate than if your account is overdrawn.
3. Set up a budget and stick to it. Spending only a set amount of money on rent, food, clothing, transportation and entertainment will help you keep your chequebook in balance each month. If you have run out of money in your budget, then put the debit card away.
4. Know your bank’s policies. What may trigger an overdraft fee at one bank may not do so at another. For example, one bank may forgive a 10 cent overdraft and not charge you any overdraft fees, whereas another bank may charge you a whopping overdraft fee for not paying attention to the rules. Allow ample time for your paycheques to clear before your rent or mortgage cheque does. Set up automatic utility withdrawals several days after your paycheque clears to avoid surprises.
5. If you have fallen into the trap, call your banker. If there is an overdraft fee on your statement, call your bank immediately and start negotiating. Perhaps it will reverse the charge if your paycheque didn’t quite get deposited into your account at the correct time. Likewise for any small amounts. Quibbling over $5 or less is quite nitpicky on the part of any bank, and you should be able to dispute the overdraft fees involved.
Arming yourself with the knowledge of how overdraft fees work should help prevent you from ever having to waste your money on them again.
