Overdraft fee is the amount that your bank charge for issuing an overdraft that has not been agreed to in prior. This type of overdraft is called unauthorized overdraft or informal overdraft. It works on a give and take concept, and where at first it may be appealing in cases of need, the cycle can be vicious.
You can end up slowly building your debts towards your bank as the overdraft fees could be monthly, daily or in the form of transactional fee. It could even involve some hidden charges. People often end up using an overdraft again to cover their previous overdraft fee and this can entrap you in a chain reaction.
But unaccounted situations are a norm and financial institutions are bound to play with their customers. How could I even stay clear of these overdraft fees?
Anticipate the Lurking Danger
Obviously your troubles are uninvited but their ramifications are pretty well known once the danger has dawned upon you. Talk to your bank in advance before going for the informal overdraft and request an interim increase in your overdraft limit, while explaining them the situation. Be proactive in this reactionary situation, if this makes sense.
Will this come free of any charge?
Obviously not! Your bank is not a charity. But the fee that you will pay for it is comparatively lower than what you would be paying if you decide for an informal overdraft.
Stop Binning Those Mail-Letters!
Rather than throwing the letters that you receive from your banks, without even reading them, it’s important that you keep a check on them. It could be a notification for a change in policy of overdrafts or your overdraft limit. More aware you are of your account workings, the better your chances to avoid the extra lump of overdraft fees.
Politeness Often Pays Off
You can request your bank to waiver off overdraft fees at times, provided you have good relationship with your bank. If you are unsure about it, you can still request them.
After all the people in that building are humans as well and they are bound to make an emotional judgment as long as it may not end up costing them heavily.
It can help you at times but remember not to make it a habit. Respect their generosity, rather than treating it as a carte blanche.
Look for Alternatives
Banks are always looking to beat off the competition by offering incentives and special packages to their customers. There are some banks that offer fee free informal drafts up to a limit of £300. However, you may have to sacrifice some other perks in exchange.
But don’t you think this is much better than affecting your credit score?
Mmm, yeah that makes sense!
So, always be on the lookout for better deals.