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Overdraft fees is something that can arise when there is an authorized payment and there are not enough funds in your account to pay for the transaction. The payment may not be declined by the bank but the bank will charge you a fee for completing the transaction. You can be charged multiple fees if there are multiple transactions in a day which the bank is paying for. Therefore, for resolving the overdraft situation you will have to deposit money in your bank account to cover the overdraft amount for the transactions and also for the fees charged by the bank. The balance can also be deducted from your next deposit you make in your account. Banks can also provide you overdraft protection so that your account doesn't go into an overdraft account, and one form by which it provides protection is that it can automatically transfer from a linked account the balance required when you have to pay for a transaction. This service of the bank also comes with a fee, but it is a lot lower than the overdraft fees.
Effect of overdraft fees over your Credit Score.
Overdraft fees does not directly relate to affect your credit score, but if your account has an overdraft or negative balance and you are unable to pay it and the account is pushed to a collection agency, that collection account could appear on your credit report and affect your credit score. Opening a new bank account can become harder due to negative records on credit report, that's why it is important to keep your account balances always on the positive side.
Ways to avoid Overdraft Fees.
Link your account to a credit card or savings account.
This can be the first basic step to avoid unnecessary overdraft fees on your transactions. This option is provided by many banking and financial institutions, to use funds from another account to complete the transactions when there are not enough funds to cover the payment for the transactions. A fee is charged for this service, but it is a lot less from the overdraft fees.
Being aware of your bank account balances.
You should be aware of the messages that you receive by the banking or financial institutions,whenever you make a transaction, so that you can be alert about the balance leftover in your account. You can also consider using a banking app, which keeps track of all your transactions, and also allows you to get an alert whenever the balance of your account is running low.
Consider opting out of overdraft protection.
You could decide to end your overdraft services, as then the bank may simply decline the transactions when there are not enough funds in your account to complete the transactions. This way you can save yourself from paying the overdraft fees that is accumulated to complete your transactions when you don't have enough funds to pay for them.
Deposit amounts quickly to maintain positive balance.
When your account shows a negative overdraft balance, you can quickly deposit some amount in your account to bring that overdraft balance on a positive side, as some banking and financial institutions give you a grace period before charging the fees.
So it is important to check your account balances regularly, so as to maintain a positive balance and also to review the transactions that needs to be completed on a daily, weekly, or monthly basis to get an idea about the funds required to pay for them, and the availability of the funds in the bank account.
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