Who knew I would someday need my very own stimulus package? I guess that’s how everyone feels the first time something like this happens to them. Despite the sad facts, I guess I have held on for pretty long. Most of my friends in college have managed to overdraft their accounts several times each so far. I have spent my entire college career living on the edge and two weeks ago, finally, it got to me. I overdrew my bank account for the first time in my life. I didn’t even know that such a thing could happen and it freaked me out. As a child of pretty nice and understanding (most of the time) parents, I was able to receive my own little bailout from them. They didn’t make any snide remarks or get mad at me for my economic misfortune, yet I have been chiding myself for it ever since. This is not like me. It is not something I ever do and I can’t stand that I have to ask my parents for money.
The truth is, overdrafts are quite common. According to a smartmoney.com article and the Center for Responsible Lending, banks collected more than $17.5 billion in overdraft fees in 2007.
Not sure what an overdraft it? I wasn’t sure either till it happened to me. So here’s the lowdown:
If you have a debit card account, as most college students do, and you happen to spend more money than you have…unfortunately, it doesn’t work like a credit card would and each time you spend more money than you have, you will get charged for each transaction.
Now, how do you avoid this awful, yet common, fate? Here are a couple tips:
- Check it: Always check your balance. Either online or through statements. Don’t avoid asking for a receipt when you take out cash like it did. It might be unpleasant, but it’s certainly informative. For the average college student, checking your balance often might be hard because of all the studying, of course. And whatever else it is we do with our time…
- Balance(d) Texting: Another great way to stay on track with your account, as I found out from a very nice bank teller, is that a lot of banks have recently been starting a text messaging service for your balance. If you are signed up to internet banking, it is pretty simple to get this kind of service and it is most often free. I guess banks realized how important texting is to us. Smart move.
- Buffer: Once you’ve checked your account balance, it is always important that you have a buffer of money because while you are checking, some transactions might be going through and you might not be ready for them. Know how much you spend and make sure to account for it.
- Ask to opt out: What you might not know and what might not seem exactly fair is that overdraft fees are actually intended for your benefit. By allowing you to spend money that you do not have, banks “think” they are helping you out by saving you the embarrassment of getting your card declined. If you don’t mind that, then by all means, tell your bank you’d rather have your card declined. It could be the warning you need. Just make sure not to write any checks until you bail yourself out.
- If all else fails: If there’s nothing you can do and you end up getting charged overdraft fees, then remember that bank tellers are people too and can give you second chances if you ask nicely. If this is your first overdraft, banks can be understanding about it, as long as you promise not to do it again. I managed to cry my way out of some of the money I lost, but I definitely learned my lesson and, as promised, will try never to do it again.
As our country’s economy along with the rest of the world has been taking a hit, I never thought about it twice. It never affected me because I was just a college student with no money anyways. But, after all this, I guess I realized that the state of the world economy only really becomes depressing when your own personal economy reflects that of the world. You might not get all the intricacies of it or what exactly “stimulus plan” means, but you get that you needed your own bailout and you just might sympathize this time.