Protecting yourself from Overdraft and Bounced Check Fees

There are a number of things that you can do to avoid or minimise charges that you incur on your bank account. These include:

1) Ask for an increased overdraft
Charges apply when you exceed your agreed overdraft limit. If you find yourself getting close to that limit, then approach your bank and ask if you can increase the limit. If you feel uncomfortable about doing this in a branch, then you may be able to apply via the banks’ online banking service. In many cases the bank will be very happy to extend your limit and this may solve your problem.

2) Switch to an account that doesn’t let you go overdrawn
This is a more extreme solution, and should only be used if you don’t have confidence if your ability to stick to an agreed overdraft limit. It involves switching to a Basic bank account. These are offered by all UK banks and are like a standard current account, except that you don’t get an overdraft and physically aren’t allowed to go into debt. You wouldn’t get a cheque book or a debit card with these accounts, but you would have a cash card to withdraw cash from ATMs

3) Make sure regular payments are set up to come out of your account shortly after you get paid.
A major cause of problems is where you have a direct debit that takes money out of your account when you don’t have enough money left to cover it. Set these payments to come out just after your salary has gone in. You will then know how much you’ve got left to spend until the next paycheck, and won’t have any nasty surprises.

4) Keep a ‘for a rainy day’ pot of savings
Another cause of problems is where an unexpected cost emerges. e.g. you discover that your roof’s leaking and you need to fix it. By keeping money in an instant access savings account, you can cater for these kinds of emergency.

5) Set up alerts on your account
Banks have started launching text alert services. If your bank offers this, you could set up an alert tell you when you’re near to your overdraft limit.

6) Keep track of your finances and don’t spend what you can’t afford
A fairly obvious one but you should check your balance recently. Internet banking and Telephone banking make this easier than ever to do. Note: Several banks, including Royal Bank of Scotland and NatWest, have also launched Bill management website services that enable customers to get e-mail alerts when a bill is due for payment.

7) Make use of a credit card (sparingly)
There may be some instances where you need to purchase something but don’t (at the time of purchase) have enough funds in your account. A credit card can be useful in such instances, as long as you are confident that you can meet the credit card monthly payments.

All these measures should help you to avoid charges. The key in all of this though is that you need to be prepared to take some responsibility for the management of your finances. Doing so, though, may bring very substantial benefits.