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I have alerts set up for each of my accounts that send me an email for 3 things:
1 - If the balance drops below a certain minimum, my safety net
2 - Large withdrawals, I do this primarily as a safety feature so that I am aware if there were any large unauthorized transactions
3 - Large deposits, this is just for my information so I can get updated with my payday deposits
This is my best suggestion, set up alerts associated with a minimum balance so that you are completely aware if things start to drop too low and an overdraft possibility exists.
One thing would be to make sure to every night, guestimate how much you spent out of your checking account (through debit card purchases, checks written, etc). Make sure to round up. That should give you an approximate idea of how much you spent.
Even better would be to write down every transaction in Quicken, but that might be asking for too much.
I'm still using the '07 version of Quicken along with YNAB, and it's working out just fine for me, but I'd love to win this one to give to my little sister. Girl could use some $ help.
One important thing people should be aware of is that most banks practice the "biggest first" order of cashing checks.
Take someone who writes three checks -- one for $1,000 for the rent, and then a pair of $50 checks for groceries and a really good shoeshine (I dunno, I'm just making it up). All three checks hit the bank the same day.
If that someone had $999 in the bank, that poor person will get hit with three overdraft charges, because the bank will first cash the $1,000 check, and then the $50 checks.
If the bank had process smallest check first, the $50 checks would have gone through, and only the $1,000 check would cause the overdraft.
Of course, no one should deliberately write a check for more money than they have, but those who accidentally do so should be aware that bank policies are written in a way that will cause the maximum damage.
Most of my day to day purchases are put on one of two credit cards (one personal, one 50/50 split with my girlfriend for food, utilities etc). My regular debits are 1) automatic savings, 2) rent, 3) Subway pass (through work), 4) 1-2 ATM withdrawals, 5) Credit Card 1, 6) Credit Card 2.
The first three transactions come at the beginning of the month when I get paid, so there's no risk of overdraft there. I always pay the credit cards off on my home computer so I have access to my balances with MS money, so I know that I have enough to cover them. If I know I'll have to make an ATM withdrawal I'll check my balance the night before.
I typically don't look online because that balance may not reflect all of the transactions that have occured.
As a bonus, you can slowly increase the amount you transfer in as a way to build up an emergency fund :).
As for checks, do all online so when I have to make a payment, I know what I have there to use. Also set up payments to occur around when one gets paid so there is sufficient funds available.
First, find a bank and an account that works for you. Many people have mentioned USAA and the good deals they offer which sound great. I bank with a local credit union and for me it is perfect, they have low fees, no ATM fees, and are generally friendly. It is worth being choosy when finding a bank especially if you think you might overdraft.
Second, go old-fashioned. Quicken is great, but sometimes a piece of paper on the fridge still trumps it. My wife and I have a bi-weekly budget. Every 2 weeks we put up X-dollars on the sheet of paper and as we spend money we write the amount or a rounded up approximation of the amount on the sheet on the fridge. This keeps us honest about our budget, then every week or so I quickly go through and reconcile the actual amounts with Quicken. This is a great way to keep track of daily spending, budgeting and avoid overdrafts IMHO.
Finally, check if your bank offers alerts. I have an alert setup that will send an SMS message to my phone and an e-mail if my balance falls below a certain amount. I also have similar alerts for my credit cards that warn me 5 days in advance of the due date if I haven't made a payment. These 2 minor things have saved me in the past (before I went on a budget) from inflicting these heavy fees.
1. I used ING DIRECT for my primary bank account. For me, that has been one of the surest ways to avoid overdraft fees AND receive a little bit of interest on my account balance. ING DIRECT is at www.ingdirect.com.
Even if I choose to have a paper check sent to someone, it *originates* through ING DIRECT and if the money is not in my account the night before the check is scheduled to be mailed, it simply does not go. Naturally the same goes for electronic checks. (I avoid these bounce backs. Read on.)
If I have an electronic debit coming from a merchant or credit card company that is larger than the balance in my account - it just bounces back. (As I said, I avoid bounce backs. Read on.)
Likewise at the ATM. If my withdrawal amount is more than my account balance - I don't get the cash.
ING DIRECT makes it easy for me to keep track of where I stand. However - I still use a Credit Card and Quicken to track my cash flow.
2. I charge all that I can to the Credit Card - utilities, cable, phone, and similar routine bills. Then I pay the card through ING. I set the card to debit ING automatically each month for the full balance, so I don't worry about missing a card deadline and paying a fee that way.
Other items like the Mortgage Payment originate automatically through ING.
3. I use Quicken to be sure that I live within my budget and know what by balance at ING *will be* over the next 30 days. What do I mean? I mean that I post, in advance, every bill that will be paid from the 5th of one month to the 5th of the next month.
Sure, some of the advance postings are estimates, and that is where the 4th leg comes in.
4. I receive notice of every bill through electronic delivery. The email account that I read every day tells me when a biller has created a new bill and how much it is. Most of these go to the credit card. I post that data diligently, as received, to the Quicken account (I don't let Quicken post for me). Others bills will come out of my ING DIRECT account. Likewise I update my ING DIRECT account for the exact amount.
So, as the month goes along each biller notifies me electronically what I owe them (electric, phone, cable, utilities, health care, and so on). I reconcile, update the posting, and have absolutely no surprises.
My ING DIRECT balance and Quicken balance always agree. I know when I have to dig into savings in plenty of time to make the transfer. I have never had a need for a paper check in my wallet. Overdraft fees are 0. Credit Card late fees are 0. I earn a little interest on the ING DIRECT balance. I sleep soundly on my four legged stool.
1) Stop spending too much :-) (Sorry figured I'd state the obvious)
2) Set an artificial line in your chequing account (i.e. $0 in Quicken actually means there is still $100 in your real bank account).
Either one works.
C8j
Works for me.
In our case, we plan to build up a buffer so that we can prevent this from happening in the future. With three kids and the economy the way it is today, this is harder than ever and yet more important than ever!
I will also be exploring the alerts available through our bank today to let me know when the balance falls below a certain level. I'm not sure if our local bank offers that level of assistance, but I'm going to find out. If not, then I may look into the My Yodlee site or another option.
Disciplining ourselves to have a regular pattern of updating our account information seems like an important step in preventing overdrafts in the future.
Thanks for the great information on a consistent basis!
Also, while debit cards are ok for people who can't control their spending, for almost everybody else they suck. I'd much rather worry about a single large credit card billpay transaction than hundreds of small debit transactions.
1. ING does not charge overdraft fees, but instead will charge you interest on the overdraft amount. So if you transfer the money in same day you will not pay anything.
2. I'm not sure how many banks do this, but Wells Fargo let me link my checking account to my (Wells Fargo) credit card, and any overdrafts automatically charge to the card with no additional fees. I have yet to overdraw my account, but I would think this behaves in a similar fashion to ING.
My second step is to minimize the amount of automated withdraws from my account, and to track them at least a month in advance. This has two advantages - first, you won't get caught off guard by automated bills. And second, by not giving companies automated access to your account, you give yourself more power in dealing with problems. If I get an incorrect bill, I can call customer service first. If it's automated, I'm forced to try to argue for my money back. Not a good position to be in.
And my third step is to maintain a $100 buffer. Ideally it never comes down to it, but it's nice to have that emergency stash in case I do make a mistake and forget about something, or if a sudden need for cash comes up. Again, if your using Excel, it's easy to setup a "holding account" that you automatically subtract from your actual available balance.
Because I've been using these steps religiously, I can't remember the last time I had any overdraft fees.
Great idea for a contest by the way!
In many places, you can get an Overdraft Loan. It's basically a line of credit. While I wouldn't suggest using it a lot, they usually only carry an annual fee and a high interest rate. The one at my Credit Union is $10 a year and a rate of 18%. The rate is horrible and the fee would be too if you never used it. But if you find yourself using it occasionally, both are much better than the $30 or more that you would get if you went overdraft.
The ultimate way to avoid overdraft fees, however, is to pay for everything in cash. Sometimes it's not possible, but paying for as much as possible that way can really be the best avoidance of overdrafts.
The other way that you can avoid paying a fee is to open a savings account. Have the savings account cover your checking this will always give you that cusion just in case it is needed.
I pay for everything with credit cards (juggling a few for maximum rewards), then pay in full at the end of the month. I very rarely use a debit card, and I also try to keep at least one month's rent in the account just in case. (~1000) I rarely write checks,and when I do, they're generally a recurring expense less than $100
Thanks for the chance. I've been using Q for more than 15 years.
If I win it will be a switch back to quicken from M$ Money... They have trashed my data for the last time. ( 8 years worth. My online backup was deleted as well because I didn't access it enough. )
Another thing to do is to make a list of all your major monthly payments and their due dates. Try and divvy them up (many companies are flexible with your billing date if you just call) so they're evenly spaced out based on your pay frequency (if you're paid twice a month, or every two weeks, for example, then try to have half the bills due in the first week of the month and half in the third week of the month). When you get your paycheck, pay off the bills that are scheduled around the time of that check. Whatever is left over is available for the other expenses that come up (things like food and gas).
it works a treat. When you get home you can download the transactions from Google Docs. I wrote a similar post in the links above.