Banks across the country offer their users “overdraft protection” or “overdraft coverage.” If a transaction pushes an account’s balance into the negatives, the protection plan allows the transaction to go through. The bank covers the remainder of the transaction in the form of a loan. The users will then have to repay the “loan” to bring their balance out of the negatives.

Overdraft protection is a convenient feature that allows users to complete their transactions, even when they technically can’t afford them. But it comes with a catch: overdraft fees.

Overdraft Fees

Banks typically charge users $25-$35 in overdraft fees. Brick-and-mortar banks often have higher overdraft fees than online-only banks. You should check your bank’s overdraft protection/coverage page to find out exactly how much you can expect to pay in fees.

Overdraft fees can quickly stack up. Every time you make a transaction that puts your account into the negatives, your bank will charge you an overdraft fee. So, if you make several overdrawn transactions on the same day, you could accumulate fees for each one.

Your bank can also charge additional overdraft fees when you take too long to repay them — this is often called an “extended overdraft fee.” Your overdraft protection plan will give you a set time to repay your overdraft fees, along with the funds you borrowed from the bank. Typically, you have 5 business days or 7 calendar days to do this. If you don’t make these payments on time, you will accumulate extended overdraft fees.

Naturally, the more overdraft fees you collect, the harder it will be to bring your balance back into the black.

How to Avoid Overdraft Fees Right Away

Respond Early

Your bank might offer a grace period after you go into overdraft. The grace period will give you a brief window of time before the institution charges you an overdraft fee. In this window, you could try to add enough funds into your checking account to bring it out of the “red” (when your balance is in the negatives). This would negate the need for an overdraft fee.

Check your bank’s overdraft policy. It should provide information about grace periods regarding overdraft fees.

Ask to Waive the Fee

You can contact your bank or credit union to request that they refund your overdraft fee. If your overdraft is due to an extenuating circumstance, like an emergency expense or an automated bill payment that was higher than usual, let your provider know. It could influence their decision. They may waive the fee and refund you the amount.

If it’s your first time making this request, you’re more likely to receive a positive response. If you have a habit of overdrawing your checking account, your provider is more likely to decline your request.

How to Avoid Overdraft Fees in the Future

Opt Out of Overdraft Protection

You do not have to keep overdraft protection. You can opt out of the banking feature entirely. Doing this will save you from overdraft fee charges.

Opting out of overdraft protection comes with its own risks. If you make a transaction that would push your balance into the negatives, it may not go through. The only exception might be if the transaction pushes your balance into the negatives by $5 or less.

A canceled transaction could result in other financial problems. If you tried to pay a bill, that payment would not go through. This could potentially lead to a late penalty from the issuer. If you tried to pay a check, that check could bounce. This could lead to non-sufficient fund fees (NSF fees), merchant fees and late fees.

You’ll have to weigh your options to see which risks you’re more comfortable facing.

Link Your Savings Account

Your bank might let you link your savings account to your checking account. In the case of an overdraft, your savings account would act as a safety net. Funds will be transferred from your savings account to prevent the checking account from going into overdraft, allowing the transaction to go through without incurring overdraft fees. This solution is only effective when you have enough funds in your savings account.

Your bank may charge you a small fee to transfer these funds when you overdraw your account. Check with your bank to learn more about this option.

How to Avoid Overdraft in General

The best method to avoid overdraft fees is to avoid going into overdraft in the first place. And how can you do that?

Follow a Budget

If you’re not following a personal budget, you’re putting yourself at greater risk of overdraft. A personal budget will set clear boundaries on your monthly expenses so that they coincide with your available income. Abiding by these boundaries should prevent you from spending more than you can afford to pay.

Start building your budget in a personal budgeting app on your smartphone or computer. Most modern budgeting apps will sync with a user’s financial accounts, including their bank accounts, credit cards and various outstanding loans. This feature could give you real-time updates about your checking account balance.

Adjust Your Budget

What if you already have a budget? Overdrawing your account is a sign that your budget isn’t working as intended. This doesn’t mean that you should toss out your budget. It simply means that your plan needs to be reviewed and adjusted.

One of the best personal budgeting tips for beginners you should follow is to regularly review your budget. Ideally, you should review it monthly to confirm that it’s working as intended. If you spot any problem areas, you can rework the budget’s guidelines to make it more effective in the upcoming weeks.

For instance, your old budget might match up with the rising inflation rates for essentials like food and gas. To accommodate these higher prices, you can reduce non-essential expenses like entertainment subscriptions and takeout orders.