Millions of people lose money out of their bank account every year, and have little to no idea why or how to avoid it. Overdraft fees are one of the major ways a bank makes money from it’s checking accounts and savings accounts that otherwise have few fees or charges associated with them. Many people are completely unaware of what causes an overdraft fee to be charged, or how to avoid them. The good news is that they’re simple to avoid, and by not paying overdraft fees you could save at least $50 a year.

Banks are expecting to earn over $38.5 billion in overdraft fees alone this year. But these fees are completely voluntary, which basically means you’re choosing to pay these banks more than they’re asking you to. What’s the point of signing up for a completely fee free checking account if you’re going to choose to pay the bank $20 or more per overdraft? Learning how to avoid overdrafts will keep that hard earned money in your pocket, instead of going into the bank’s pocket.

An overdraft is defined as any time your account goes into the negative for any reason, unless it was due to a systems malfunction. So anytime you spend more than is in your account, you will be charged an overdraft fee. This fee can range from $5 to up to $50, depending on the bank. When you sign up for an account, make sure you examine the fees associated with the account. Even fee free accounts usually charge an overdraft fee, which must be shown somewhere in the paperwork you’re provided when you open an account. You can also visit or call your bank and ask about the overdraft fee amount.
Overdraft fees are such a problem that the Federal Reserve is currently working on changing how banks can charge consumers with them. They’re completely avoidable if you can keep your account balance out of the red, which is simply a matter of keep a good tally of your deposits and expenses as they occur. Or, for a more simple approach, use a prepaid debit or credit card.