There are many ways to protect yourself from overdraft fees. You can link a savings account, get a line of credit or even try a credit union. Some banks don’t charge this fee at all. So, scroll down to explore how to get rid of an overdraft or find a bank account with no overdraft fees.
You can link a savings account to your checking account to get free overdraft protection. When an overdraft occurs, the funds from your linked account will be used to cover it.
As long as you have enough money in the linked account and are enrolled in automated payments through that account, this is a relatively simple way of getting overdraft protection for free. However, there are some things to watch out for:
Check out a credit union if you’re looking for free overdraft protection. Credit unions are not-for-profit financial institutions that are member-owned and operated by their customers. They offer personal checking accounts with no monthly service fees, various savings options, and even some student loans. Because they exist to serve the people who use them, many credit unions also offer free overdraft protection—or at least an extended grace period to cover your mistakes before charging you extra money.
For example: If you try to purchase with your debit card but need more money in your account, most banks will charge $30 or more per transaction.
Another option is to sign up for a line of credit, which allows you to borrow money at a higher interest rate than what you’re getting from your savings account.
You can use this credit limit to cover overdrafts and ATM withdrawals, but be aware: The interest rate on these loans tends to be pretty high—so it won’t be as cheap as using your debit card or cash. You can also use the line of credit like a regular line of credit (i.e., make purchases or pay bills), but remember that these payments will start accruing interest immediately.
But remember, “You can overdraw up to $50 in debit card purchases. Any debit card purchase exceeding this amount will automatically be declined,” says experts from SoFi.
If you’re interested in opening a checking account for overdraft protection, know what it will cost you. Many check cashing services charge much higher fees than banks do—often more than the average overdraft fee. Check cashing services also tend to have fewer free ATMs available and can charge higher interest rates on credit cards, which makes them less attractive than an account with one of the major banks. Finally, suppose your paychecks are deposited directly into your checking account using direct deposit. In that case, many employers offer free money management services that can help manage your finances until payday arrives and allow you to use a lower-cost credit card for purchases during that period instead.
There are lots of ways to get overdraft protection. It’s important to know what you’re signing up for and shop around before committing, but this guide can help you determine which option is right for you.