¿How to avoid overdrafts?

Here are some tips to avoid overdrafts in your accounts, but first we will identify what an overdraft is and why it happens. 

An overdraft takes place when you do not have enough money in your account and a transaction is approved and paid by the bank. In this way, you have paid the outstanding debt, but your account has been overdrawn with the entity that made the payment, and usually these entities charge a fee referred to as an overdraft fee, corresponding to the service provided.

Many banks and credit institutions offer overdraft protection programs, in which they generally pay the transaction and then charge you a fee (this is how you must pay the money that was lent to you for the payment of your debt plus the charge for the service). Overdrafts can also be covered by transferring funds from a linked account, a credit card or a credit line.

There are several ways to overdraw an account, it can be through the use of checks, transactions made at ATMs, purchases with debit cards in different establishments, automatic bill payments that you have scheduled to be debited from your checking account or charged to your credit card, withdrawing money in person at the bank.

The entities that are authorized for these types of transactions have fees associated with overdraft protection, so when you are looking to open a checking account, you have the right to ask the conditions and costs for this protection and it is in your hands to link an account or get a line of credit.

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Likewise, you can inquire how many overdrafts you can have in one day, remember that this depends on the entity in which you have your accounts and each one has different policies.

To avoid overdrafts and to handle them in the correct way, keep in mind the following tips:

• Maintain an organized financial life and clarity about the money you have in your accounts.

• Make a monthly budget in which you identify your expenses and the payments you must make.

• When you open an account take the time to read the documents you sign, there you will find overdraft policies.

• If you have chosen not to enroll in a debit overdraft program, the bank or credit union will reject the debit card or ATM transactions when your account does not have sufficient funds to cover them, and will not charge you when this occurs; however, you must notify the bank or the credit institution of the decision you have made.

• Some banks offer you the option of refusing overdraft checks and other types of payments. However, consumers who refuse check overdraft coverage or for ACH transfers may have to pay a fee for lack of funds (NSF) to the bank or credit union, which usually costs the same as the overdraft charge.

• If you are enrolled in a program to cover overdrafts and are paying for that service, you can change your mind at any time and request to withdraw from the program, you should only inform your bank or credit union.

• If you do not believe you have authorized overdraft protection, and the bank or credit union is charging you an overdraft fee, you can file a complaint.

Remember that the Office for Consumer Financial Protection (CFPB), an agency of the United States government that ensures that banks, lenders and other financial companies treat you fairly, provides general information to consumers on these topics: www.consumerfinance.gov