It can be surprisingly simple to bounce a check – and overdrafting can put a serious hurt on your finances, especially if you’re living on a tight budget. That’s because banks and credit unions can legally charge non-sufficient funds and/or overdraft fees multiple times per day.
The Consumer Financial Protection Bureau recently reported that bank fee policies are starting to change. About time, since overdraft and NSF fees added up to approximately $15.47 billion (yep, that’s a “b”) in 2019, the latest year for which the CFPB has data.
In a recent article for Carefull, “How to avoid overdraft fees,” I noted a handful of basic tactics that can eliminate or at least reduce these pesky charges.
Wondering how someone could not know what’s in their account? Here’s one way: Some banks have cut-off times for deposits. That check you deposit late Friday afternoon (or in the evening, via the ATM) might not be recorded until Monday, which means it might be unavailable until Tuesday or later. Whoops.
Cash-flow issues, forgetting to write down a debit transaction (or several of them), neglecting to balance your checkbook or even a simple math mistake could result in rubberized checks. Something to think about.
Some more Carefull stuff
It’s been a while since I did one of these “Read me elsewhere” posts, in part because a lot of my freelance work these days is either unsigned or is so specialized (read: dutiful, or outright dull) that I hesitate to noise it around.
Lately I’ve done a bunch of pieces for Carefull, an app-based service that monitors money, credit and identity for aging adults. The company’s website publishes other useful info for older consumers, and for the people who love them. Here are my additions to that body of knowledge:
“How retirees can lower their bills”: Most of these tactics would apply to non-retirees as well.
“What to do when your identity is stolen”: Another one that’s good for all ages.
“What is Medigap?”: It’s darned complicated, that’s what it is. I’m learning all sorts of useful stuff by being a writer. If you are thinking about getting Medigap, pay close attention to the time limits noted in this article.
“What is Medicare Advantage?”: It’s another confusing topic, which I tried my best to de-mystify.
“How retirees can cut healthcare costs”: Anyone who’s getting older (me! me! pick me!) could use this one.
“Senior scams and how to avoid them”: Share this one with anyone you know who’s older or who has older relatives.
Retirement, frugality and refinancing
Entering the third phase of life isn’t just a question of cashing your final paycheck. In “6 things you need to do before you retire,” on Money Talks News, I point out the advisability of things like learning how Social Security is taxed, budgeting for medical expenses, and doing the retirement income math (and preparing to pivot if you don’t like the results). It’s essential to do these things months in advance, as opposed to two weeks before your last day at work.
Many retirement mistakes fly under the radar, such as forgetting to update legal documents, or spending too much because now that you’re free you want to do All The Things. In another post for Money Talks News, “8 things you should not do in retirement,” I point out some of the main offenders and offer suggestions on how to avoid these missteps.
Also on Money Talks News is “9 things frugal people never do” – a title that’s pretty self-explanatory. Obviously, I could have come up with way more than nine things, but the latest research indicates that people switch off after a certain number. Who’d want to read “109 things frugal people never do?” (Well, I would. So would some of you, probably.)
Finally: If looking into refinancing your home, you may have asked yourself the musical question, “Do you skip a mortgage payment when you refinance?” (Short form: No.) And in some cases, people with cash-flow issues decide not to make the payment during the month they close, and also to roll other costs (e.g., property taxes) into the new mortgage – something like a cash-out refi, without the higher refinance costs (especially if you don’t have exceptional credit). Again: The things I learn on this job…!
Readers: Have you ever bounced a check? What are your go-to tactics for avoiding fees?
My technique is to never rely on my memory and to keep a buffer in my checking account. I’m fortunate to be able to do the latter now; I couldn’t when I was younger. For the memory aid, I keep a sticky note in my checkbook of every auto-withdrawal coming out and the approximate day of the month. Then at each twice-monthly paycheck, I add the deposit and deduct each withdrawal coming up before the next pay. I look at the calendar to see if there are upcoming situations where I’ll need cash or to write a check and plan for that. Most expenses auto pay on the credit card so I allocate a payment there from the bank’s bill-pay website at the same time. Everything is written down in the checkbook. I use a calculator to verify my math, too. It’s too easy to make a dumb mistake when you’re tired or stressed that can have bad consequences. I also always balance my checkbook against the monthly statement and have text alerts from the bank whenever there’s a payment or credit. All the memory tools and double checks!
Smart.
Every time my sister uses her credit card, she subtracts the amount from the checkbook balance. No surprises when the bill arrives.
I’ve talked to people who make a credit card payment every week. The resulting drop in money in the account reminds them not to spend first, then figure things out.
Thanks for reading, and for leaving a comment.
I think the best method to avoid an overdraft fee is to get overdraft protection on your account as soon as you open it.
I think most people with decent credit will qualify, and if an accidental overdraft happens you can just pay the balance off once it appears in your account.
Also, checking your account each day.
There’s often a fee associated with overdraft protection. But it’s better to pay that than to pay an NSF fee.
We’re fortunate to have a pretty healthy buffer in the checking account. Even so, I check my balance multiple times a week and maintain a checkbook register. Very helpful come tax time. I also write down and keep receipts for everything!