Overdraft (NSF) fees are the bane of the existence of any banking customer. Even the most responsible among us have gotten dinged once or twice. And those dings can hurt, at $30 to $35 a pop for most major banks.

Banks would like to keep things status quo, of course. That is because they collectively earn over U.S. $30 billion per year in overdraft fees alone. Whereas bank fees were just a mere form of compensation for the banks when a customer overdrew an account in decades past, these days the fees have become a true profit center. Banks make a healthy portion of their income from these fees.

Overdraft fees are something that nobody likes to see on their monthly statement. Whether you check your statements online or receive them in paper form, you want to see interest earned and a detailed record of your payments and deposits: but not overdraft fee charges.

How Banks Charge Overdraft Fees

Banks are able to charge hefty overdraft fees because customers like us have agreed to paying them. That’s right: most of us signed up for overdraft protection programs when applying for a new checking account – without even knowing it in most cases.

This is because, until July 1, 2010, banks were allowed to have their overdraft protection programs be opt-out, meaning that a new checking account applicant would have to actively tell the bank they did NOT want to enroll. If the customer didn’t say just that, the bank would enroll them automatically.

Now, new Fed rules have made these programs opt-in-based. Still, it is likely that most people will enroll in the programs because they do not understand the downside well enough to refuse.

To Beat NSF Fees, You Need to Work the System

So, if you have overdraft protection, how do you beat overdraft fees? You have to know how to “work the system.” Meaning: you need to educate yourself regarding how the fees are typically charged, and then you need to take the right steps to avoid the fees altogether.

How to Beat Overdraft Fees: 5 Tips

Here are 5 tips for how to beat overdraft fees:

1. Remain aware of your balance at all times: By continually checking your checking account balance at least once or twice per day, you can stay in close contact with your current balance. This will help you avoid writing checks or making debit or credit purchases that could otherwise put you over the edge – forcing you to incur more fees.

2. Keep a padding on your checking account balance of at least $200: Another strategy is to simply keep more money in your checking account as padding against possible overdrafts. Not everyone has the money to do this, however.

3. Link your checking account to a backup savings account: Most banks will offer you a way to link your checking account with a backup savings account. However, this also requires that you keep money in the savings account at all times.

4. Pay for everything in cash: You could just avoid paying with credit, debit and check altogether. This would completely solve your problem, but it is not a convenient option for most people.

5. Change banks to one that will never charge you an overdraft fee: Finally, the easiest solution is simply to switch banks. That’s right, there are banks out there which will allow you overdraw your account but still won’t charge you an overdraft fee. Switch and you will never have to worry about paying these fees again.

Follow these 5 tips for how to beat overdraft fees.

Author Bio: Get a list of no-overdraft-fee banks in your area at: Local No-Overdraft Fee Banks.

Category: Finances
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