Overdraft fee is a penalty that you pay when you withdraw more than what your account holds. It can be worse than late payment fees that you pay on a default of a debt. For some it can be annoying as they do when they need money due to unforeseen expenses, but for others it can be an acceptable price to pay. It seems quite difficult to make understand banks and financial institutions about your financial condition. When you are broke and you need money urgently, you should use other alternatives instead of putting your account on overdraft.
Link it with your savings account
To avoid incurring overdraft fees you should link your checking account with savings account. As you withdraw money from your account more than the limit, the excess amount will be pulled from your savings account to maintain the balance along with a nominal fee. This plan works out only when you have money in your savings account. Plan strategically how much amount you will put aside in your savings account. This is the best way to build emergency cushion provided you do not withdraw money regularly. Let your account balance go up and withdraw only when you need money urgently. Make sure that you have not consumed all withdrawal limits of your savings account. This account will help you earn a good amount of interest that is mainly not possible with checking accounts.
Use your credit card
Banks can also allow you to link your checking account with your credit card to provide overdraft protection, but savings account is a much better option as it does not involve borrowing and you do not have to pay interest. However, it is still a better option than overdraft fees. In case of any emergency, you are likely to use your credit card when your account balance drops down. It will not invite overdraft fees. However, it can throw you in debt if you do not clear dues as soon as possible. Make sure that you pay the whole of the amount within next 30 days otherwise you will end up paying interest. The use of a credit card is not problematic as long as you use them during emergencies and pay off the loan as soon as possible.
Take out guaranteed loans
You are likely to have maxed out your credit card and your account does not have enough balance to cover unexpected expenses. You will rush into taking out a loan. Traditional lenders may turn down your application because of your impaired credit standing. However, direct lenders can approve your loan application despite bad credit rating. Take out 100% guaranteed loans so that you can get money as soon as possible.
The lender will not run a hard credit check, therefore you will not lose your credit score. After evaluating your income statement, the lender will immediately sign off on your loan application. You will get money the same day when you put in the loan application. These loans are known as loans with 100% guaranteed approval. You will have a variety of loan offers that you can apply for, but you must consider your repayment capacity and credit needs. Choose the option that best suits your needs. If you have an option to get an instalment loan, you should go for that as they are more manageable than other small debts that require lump sum payments.
Take help from your friends and family
You may feel awkward taking help from your friends and family, but it is a better alternative than incurring overdraft fees. Of course, you cannot make it your habit as you would not like to be shown as a scrounger or ruin your relationship, but approaching them once is not as bad as you may think. When you are asking your friend for money, make sure that both the parties agree with terms and conditions. You will have to ensure that you are going to pay back money on time. even if you are borrowing a small amount, keep your friend in loop about your repayment plan. It is better if you have got an agreement to ensure that both the parties are on the same page.
Monitor your balance
The best way to avoid overdraft fees is to keep tabs on your account balance. Have a record of every transaction – withdrawals and deposits – so that you know the accurate balance of your account. By this way, you are less likely to incur an overdraft fee because you will know exactly how much money you have in your account. If managing a spreadsheet seems to be difficult, you should sign up for an email or text alert so that you receive a notification as your account balance drops.
The bottom line
Overdraft fees can ruin your finances especially when you are already running out of money. Even if you encounter an unforeseen expense, you should try to avoid it. Instead, you should take out a loan from a direct lender. You will get money instantly and at affordable interest rates. Financial experts recommend that you should prefer taking out instalment loans as they are more manageable than loans that require lump sum payments. The repayment term may vary from three months to 12 months depending on your credit needs and repayment capacity. Though you can get emergency loans with 10% guaranteed approval, make sure that you are not going to make any default. Otherwise, you will end up paying late payment fees and interest penalties into the bargain.