Protect Yourself From Bank Fees

Are you feeling the sting of bank fees? Many people are – especially customers of big banks, who often charge overdraft fees as high as $35.¹ Those most vulnerable to fees: Young adults, who tend to rely on debit cards for the smallest of purchases (seven out of 10 young adults say they would use a debit card for a purchase of $2 or less.)² But even tiny purchases can incur big fees: a $20 overdraft composed of five small debit card transactions incurs five separate $35 overdraft fees for a total of $175 in fees!³

To take the sting out of big bank fees, follow these precautions:

1. Keep a close eye on your account balance. Record every single ATM and debit card purchase as you make them—or at least once a day. If you don’t know your balance, it’s easy to overspend.
2. Stash some cash. Protect yourself from overdraft fees by adding a cash cushion to your account and keeping it there from month to month (say, $100 or even $50).
3. Pay cash when you can. While convenient, using a debit card for tiny purchases can make keeping tabs on your checking account tough (signature-based debit card transactions aren’t deducted from your account for two to three days). Pay cash whenever possible.
4. Sign up for real overdraft protection. Many banks automatically enroll customers into pricey “courtesy overdraft protection” programs—but the fees are anything but courteous ($20 to $35 per overdraft).⁴ Instead, enroll in a true overdraft protection program that links your checking account to a savings account, line of credit or credit card. You’ll likely pay an annual fee for this service and a small fee per overdraft, but you’ll be guaranteed protection should you need it.
5. Avoid using debit for hotel or car rentals. These merchants place a hold or block on your checking account when paying by debit — often the full amount of the bill plus 20% or more.⁵ While money doesn’t actually leave your account, a block can affect your available balance for a day or two and potentially create an overdraw on your account.

Primerica Representatives are not financial planners, financial consultants, credit counselors or debt management advisors.

1. “Young Debit Card Users Pay $1 Billion in Overdraft Fees,” Credit.com, viewed July 11, 2012
2. Ibid
3. Ibid
4. Ibid
5. Ibid