How To Avoid Overdraft/NSF Fees:
There is a long discussion going on in the Wesabe groups about the overdraft. Some banks call it NSF, which means there are insufficient funds.
If you don’t know, banks charge in a way that maximizes the number of overdrafts. They rank the credits on a given day by the amount and apply it in descending order, with the largest first and the smallest last. If a large debt causes an overdraft, each subsequent smaller debt on the same day also creates an overdraft. Since banks charge credit to a checking account for each customer, the following applies the more credit to a checking account, the more costs.
This post is not about whether these practices are fair or how dishonest the banks are. You can read about it in the Wesabe group’s discussion and articles related to it. I write about avoiding overdrafts / NSF fees.
There are about three ways to avoid over-arrangement:
(a) Find a bank or credit union that does not cover overdrafts. If they don’t charge you, you can uncover as much as you want and still not uncover. Good luck.
(b) Avoid getting caught by keeping an eye on the note. Carefully record every check, debit card purchase, and bill payment. Correctly determine credits and deposits and understand policies related to the availability of funds. For some people, it might work, but for many others, it’s probably too much work. Some banks give their customers a “free prison card”, which allows them to be redeemed for free for one year. If you manage your money well, this annual waiver may be enough. For others, the wrong time will still occur.
(c) Avoid failing by always having enough money. eh! If you are never negative, you will never be negative.
Let’s move on to option (c). You know everyone should have an emergency fund that covers 3 months of life. If you have enough money for three months without a dime of income, you will never be found out as long as you have income, regardless of the order in which banks put borrowers or how long they hold their deposit. There are several ways to ensure that you always have enough money for your debtors:
1.Leave a pillow in your checking account.
You leave extra dollars in your checking account and never let your balance drop below a certain level, let’s say $ 3,000. If your balance is close to the fund, you need to deposit money somewhere, such as an online savings account or savings account. market background. That way, you’re still covered, even if the timing of a withdrawal or deposit is sometimes wrong. I already did. This prevents overdrafts, but also creates a negative balance on a checking account which is generally interest-free. Even with 2% interest, the lost interest is $ 60 per year on a $ 3,000 reserve.
2. Control + save + overdraft protection.
In this configuration, there are fewer pillows on the checking account. The extra money stays in a savings account at the same bank. You also sign up for the overdraft service which can access your savings account if there is an overdraft in your checking account. Using the overdraft service may still incur charges, but this is usually less than the overdraft amount without the service. I’ve seen some banks charge around $ 10 per day, regardless of how many items are discovered on the same day. $ 10 per day is definitely better than $ 35 per item. The problem with this setup is that the savings must come from the same bank, which doesn’t necessarily provide good interest and doesn’t eliminate overdrafts.
Discovery funded by the brokerage. This is what I have now. I use Fidelity Cash Management Account, which in my opinion is a better checking account than a checking account. You can leave everything in your “core” if you like simplicity. It will work as an option (1). Every dollar on the account pays interest. You don’t mind having a dead balance. If you want to be more aggressive and want something like check + savings, just buy a money market fund in the account. The “core” is like the control part. The money market fund is like the savings part. The overdraft protection of money market funds is automatic. There is no entrance and there are no expenses.