It sounds simple. The number one way to avoid an account overdraft is to spend less money than you have. That way you'll always have money in your account. However, we all know that reality is a little more complicated than that. So what can you do?
Probably the best thing you can do is to actually monitor your account. Too many people really have no idea how much is in their account at any given time, or what hasn't yet cleared their account If you've never balanced a checkbook, you need to learn now. It's nothing to be afraid of and it's extremely efficient at helping you keep track of your funds. Not only that, but banks can make errors also and if you don't balance your account, you may never catch them.
There are a couple of choices that you may have to protect your account. Most banks offer an overdraft protection tied to either your savings account or a line of credit. If possible, the savings account is a better choice. You may still pay a fee for the bank to transfer money automatically to pay a charge, but you won't have a bounced check or overdraw your account. The other choice, a line of credit, is more expensive and harder to qualify for. You will have to apply for the line of credit and it will show on your credit report. Not only that, but you will almost always pay a charge if you need to access it as well as interest as long as the line of credit has a balance. For more information on this see the article How to get overdraft protection.
Never trust the available balance you see at the ATM or even online. If you've written a check that hasn't yet cleared, and you withdraw your available balance, you run the risk of overdrawing your account when the check clears. If you get in the habit of balancing your checkbook, that available balance is probably much more reliable.
Learn how your bank processes your charges. Quite a few banks will process the charges from largest to smallest. That will cost you the most in overdraft fees if you overdraw your account. A few banks will process the smallest to largest. That can save you from all but maybe one or two fees if you overdraw your account.
If you are a die-hard ATM/Debit card user, you can ask your bank to remove the courtesy pay from your account. Most banks will not charge a fee for denying the use of the card. If you try to use the card for more than the available balance, it will deny the purchase. Of course you'll have to cover the purchase some other way and it may cause you some embarrassment. However it may save you a bit of money if you're prone to overdrafts using your debit card.
Others recommend keeping a cushion in your account. Maybe $100.00. Something that you don't touch no matter what. However, if you have enough willpower not to touch that, then you should have enough willpower to watch what you spend and learn to live within your income.
Really the best way is to spend less than you make. If you make $100, learn to spend $90 and keep that other $10 to build your own cushion.
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