How to Avoid Debit Card Overdraft Fees

TV commercials show fast-food customers sailing easily through the lines using a debit card to pay for their burgers. The commercials don't show the customers just as easily piling up checking account overdrafts and fees of $25 to $35. Recently, banks started allowing debit card purchases no matter what a person's bank balance, often leading to unpleasant surprises.

Instructions

Difficulty: Easy

1. Don't be fooled by an online statement that shows how much is in your bank account--some transactions may not show up yet.
2. Avoid this situation: You have $100 in your checking account. You write an $80 check to pay your cable bill, you buy your designer coffee for $5 using your debit card, then you use the card for $25 worth of gas. Oops. That could be at least one, possibly two, overdrafts at fees of $25 to $35 each. That's some expensive coffee.
3. Keep track of what you are spending. By the time your purchases and charges show up on your statement, it's too late. Save receipts and record every ATM withdrawal, every debit card expenditure and every check you write. Remember to include those little ATM fees; just $2 can trigger an overdraft.
4. Balance your checkbook just as you did—or should have done—in the olden days of paper checks.
5. Keep an extra "slush fund" in your checking account—say $100—that you never touch. If debit card expenditures go into that $100, replenish it ASAP.
6. Pay cash for gas if you can, rather than using a debit card. Some gas stations can put a $100 hold for your purchase, even if it was only a few bucks worth of gas.
7. Ask a parent to be a co-owner of your account, if you are a college student, or consider asking your bank to link to an account, such as a savings account, for emergencies. Consider an overdraft protection plan, although they can also prove costly. Better yet, just watch your spending.