There’s nothing quite like that moment before your checking account dips into the negative. Ever jumped out of an airplane? Or been stuffed into a cage and dropped into shark-infested waters? If you have, or at least have a decent imagination, you know the feeling.
Here’s the thing: Overdrafts can feel inevitable, like that train is already barrelling down the tracks and chances that you’re going to escape it are slim to none. However, if you take a deep breath and consider your options, you might just be able to Eleven-from-Stranger–Things that train and stop it dead in its tracks. (Maybe try to be a little less dramatic about it. Just a thought.)
There are six things that you can do when you are about to overdraft:
- Keep an eye on your account balance
- Transfer money ASAP
- Contact billers and other services scheduled to charge your account
- Contact your financial institution
- Manage your spending
- Reconsider overdraft protection
Keep an Eye on Your Account Balance
Keep a very (very) close eye on your account balances and charges. Banks are not legally required to notify you if you’ve overdrafted, so they could apply a fee and deduct money from your account without you ever having known. You should also keep a detailed record of what bills you have recently paid, when they are expected to be withdrawn, and all upcoming charges.
To save you from having to manually check your account balance every four seconds, sign up for low-balance notifications, which you can usually enable from your bank’s website or mobile app.
Transfer Money ASAP
This isn’t always possible, but if it is, it’s important that you get money into your account quickly. You could do an immediate transfer from another checking account or savings account at the same bank, or deposit cash into the account in-person at a branch or via ATM.
Some ATM deposits may not be available immediately, so it’s important to know your financial institution’s policy. Bank-to-bank transfers and other mobile payment services can also take several business days to complete, but can be an alternative solution if you do not need the funds immediately.
Contact Your Biller
If you have payments scheduled to come out of your account—such as utilities, phone or internet bills, a gym membership, or streaming service—you should contact the biller or service immediately. Often, they can work with you if you are experiencing financial difficulties; they may be able to postpone your bill until a later date, or potentially even waive it.
In these situations, be honest about what you’re going through. Were you recently laid off? Have your child care expenses unexpectedly increased in recent months? Explain these things to the representative so they can help you find the best solution.
Try to contact your biller before your financial institution—if you’re able to avoid the fee altogether, then you won’t have to worry about asking your bank for a refund.
Contact Your Financial Institution
If it comes down to it, it’s worth giving your bank a call. Much like with your biller, you should be up front about why your account balance has dropped so low and what you’re doing to fix the situation. If anything, this call will show your bank that you are a reliable customer who keeps a close eye on your account and cares about your financial health—that goes a long way.
When calling your bank, start with:
Hello, my name is , and I’m calling about my account with the last four digits . Unfortunately, I’m in a tricky situation. My account balance is quite low, and I’m expecting some essential, recurring bills to come out of the account in the next few days. I’ve been keeping a close eye on my balance, and I’d really like to avoid an overdraft fee if possible. Considering this is not a common occurrence for me, I’m hoping that you can help me out here and explain my options.
Adjust accordingly to fit your situation, but use this as a jumping off point. Remember to be respectful and polite during the conversation, but don’t be afraid to stand up for yourself.
Manage Your Spending
Once you’ve moved some money around and contacted all necessary parties, it’s time to take a hard look at your spending habits and how they could better align with your financial situation.
In the short term, this could mean reducing the amount of money that you spend eating out or looking for coupons and discounts. Longer term you can reduce financial waste by negotiating down credit card interest rates, essential bills, or eliminating unnecessary expenses altogether.
When your account has a low balance, one way to limit your spending is to pay with cash. By paying with only the bills and change that you have in your wallet, you’re forced to consider what is really important for you to buy and not rely too heavily on plastic.
Reconsider Overdraft Protection
We have a lot of questions about overdrafts. #1: Who even came up with the concept of charging someone for money that they don’t have in the first place? We’re not saying that we believe in overdrafts and all that they stand for, but most financial institutions charge them. Your job then becomes doing everything in your power to avoid them.
Overdraft protection is a service offered by many financial institutions that allows you to link your checking account to a secondary checking account, savings account, credit card, or line of credit that automatically transfers funds into your checking account if you overdraft. Sounds great, right?
Unfortunately, if you’re enrolled in overdraft protection, you still get charged a fee for the transfer. Luckily, banks are required to ask you whether you’d like to opt into overdraft protection, so you’re free to reject. At many banks, overdraft protection only applies to everyday, non-recurring debit transactions and ATM withdrawals; your bank can still charge you a standard overdraft fee for other transactions—such as checks, recurring debit and ACH transactions, and online/automatic bill payments—even if you don’t opt in.
It’s up to you whether or not overdraft protection makes sense for your finances—just make sure that you’re making an informed decision.