Sometimes it’s hard to realize when you’re overusing overdraft protection. It may allow you to pay your bills on time and keep you from bouncing checks, which can save you time, money, and stress. However, it can cost you a staggering amount of money if overused. The difference between use and overuse is visible in your balance. Are you usually in the negative? Do you find yourself consistently overdrawing two or more times every month? Although it may feel difficult to break out of the cycle of consistent overdraft protection, there are real solutions, and it is an effort worth making. Here are three tips to avoid overusing Overdraft Protection.
1. Get a sense of perspective: The first step to effective planning is to know where you are starting. In this case the best way to do that is to go through the last 3-12 months of statements and count the number of Overdraft charges you have racked up. Take your average as a starting point. If you average five overdrafts a month at $27 an overdraft, you are spending $135 per month and $1,620 a year simply to fund a negative balance! We want you to put that $1,620 to a better use and we know that you do too.
2. Total your income and expenses: Take a look at your paystubs. If you are full time you don’t need too many paystubs to see how much you make per pay period. If you are self-employed, employed part time or have a few part time jobs, try to gather 6-12 months of income history. Get your average monthly income from these records. If you can’t gather that many months of income, try to find at least a few paystubs and consider what a bad string of work weeks might look like as far as income. Try to plan for those. If you plan for the bad weeks you can be prepared and pleasantly surprised by the good weeks. Total your expenses from your credit card and debit card statements. Try to add different categories, like “Dinner Out”, “Groceries”, etc.
3. Prioritize: When you subtract your expenses from your income, is it negative? If you frequently find yourself with overdraft fees, chances are good it is. Even if not, maybe your expenses are cropping up before your money comes in. Either way, find expense items to cut. While it can be hard to think about what you won’t spend money on, keep your eyes on the price, and remember that by cutting them now you’ll be not only saving money on expenses but also on your overdraft usage, which means that after a few months you may be able to buy it anyway, and this time, for $27 cheaper! By prioritizing, you can keep doing the things that are most important to you, and set clear boundaries for yourself about what or how much you can do things that you value less.
If you are determined to stop overusing overdraft, the benefits can be tremendous. Keep in mind that progress is possible, perfection is not. If you do your best to follow these steps, and keep at it, we hope you will begin to see a reduction in using your overdraft protection.