4 Smart Ways to Avoid Overdrafting Your Bank Account

Updated - First published on Aug. 9, 2024

Ashley Maready

By: Ashley Maready

Writer and Editor

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures that our product ratings are not influenced by compensation. Terms may apply to offers listed on this page. APY = Annual Percentage Yield. APYs are subject to change at any time without notice.

KEY POINTS

  • Downloading your bank's mobile app means being able to check your balance from anywhere.
  • Sign up for low balance alerts to get a text or an email if you're getting close to overdrafting your account.
  • It's wise to leave yourself a buffer of cash in your checking account.

A checking account is likely the cornerstone of your finances -- you receive your paychecks there and use the account to funnel money elsewhere (such as a savings account or investment account).

While using your checking account is likely pretty easy, this type of bank account is not without potential pitfalls -- most notably, overdrafts. This is when you spend more money than you have in the account. And you may be charged an annoying fee when that happens, too.

Here are four solid tips to keep this from happening to you.

1. Use technology

Gone are the days when we had to go to a bank in person or make a phone call to check our account balances. You don't even need to visit an ATM to get your balance -- you've got a powerful tool in your pocket: your smartphone.

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If you haven't already, it's worth downloading your bank's mobile app and getting familiar with how it works (it's likely very easy -- banks put a lot of time and money into the user interfaces for their apps). Then you can check your balance wherever you happen to be.

If you suspect your account is getting a little low, you can check for yourself. And if you're suspicious that a bill you paid hasn't been debited from your checking account yet, you can log in to see, and then follow up if need be. Knowledge is power, and knowing your balance is the first step of avoiding overdrafts.

2. Opt in for low balance alerts

That mobile app (or even your bank's website) likely offers you another great tool for staying on top of your bank account balance: low balance alerts. You can sign up to receive an email or a text message if your balance falls below a certain amount. You'll have an immediate signal that you need to stop spending until more money hits your account.

Oh, and opt in for direct deposit alerts while you're at it -- these will tell you when you've been paid and so you know you're safe to spend money again.

Your bank likely offers you the option to sign up for full-on overdraft protection. If you opt in for this feature, you'll be able to link another bank account (or possibly a credit card) that can be drawn from if you spend more than what's in your checking. I have overdraft protection on my main checking account by way of the savings account connected to it.

This savings account is of limited use to me otherwise (thanks to its pathetically low APY and lack of savings buckets), but I keep it funded just enough to avoid a monthly fee and to support overdraft protection in the event that I overdraw my checking account. This is a good way to avoid an insufficient funds (NSF) fee -- as reported by the AP, those fees cost an average of more than $26 each.

4. Leave yourself a buffer

Depending on your own personal finances, this last one may be easier said than done -- it certainly was for me during all the years I lived paycheck to paycheck. So that's why it's last on this list -- the above three tips are a lot more useful for someone who doesn't have a lot of money left over after the bills are paid.

But if you're able to, get in the habit of leaving a certain amount of cash in your checking account as a buffer against overdrafts. I do this -- for a while, it was $1,000 extra, then I got more comfortable with my finances and these days, I leave just $500 extra in my checking. I like to earn interest on as much of my cash as I can, so after I pay my bills every week, I move anything left above that $500 to my high-yield savings account.

Your own magic number is based on your money and your comfort level. Maybe $1,000 or $2,000 is right -- or maybe you want to keep an entire month's worth of bills in your checking. Whatever you do, keep track of how much should be in your account at any given time. This will make accidentally overspending your balance unlikely.

Overdrafting your bank account is no fun -- and it can be expensive to boot. Follow these tips to ensure you stay in the black.

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Ashley Maready
Ashley Maready icon-button-linkedin-2x

Ashley Maready changed careers from museum operations and management to writing and editing in 2021. She has a passion for teaching others about better living through improving your finances.