It happens to the best of us from time to time. We lose track of our expenses, and soon enough, that dreaded email shows up in our inbox notifying us about an overdraft. You might be asking yourself, “Do overdrafts affect credit score?”
The good news is that your checking account information, which includes overdrafts, will not affect your credit score. The bad news is that overdrafts can result in hefty fees. It’s best to avoid them altogether and we’ll go over some of the ways you can do so.
How to Prevent Overdrafts
It can sometimes feel that overdrafts are hard, if not impossible, to avoid. But that doesn’t have to be true! With the right practices, you can feel confident about managing your money and avoiding unnecessary fees. Start by following these suggestions.
Setting and Keeping a Budget
One of the best ways to start managing your finances and get rid of those pesky overdrafts is by creating a budget. Start by identifying your short-term and long-term financial goals. Whether you want to save up for a home, or a vacation, knowing your goals will make you motivated to follow through on them. Once you’ve done this, it’s time to take a hard look at your monthly expenses. A good idea is to follow the 50/30/20 rule.
The 50/30/20 rule advises not to spend more than 50% of your monthly income on necessities like food, rent, bills and debt. Then 30% of your monthly income can go towards wants like entertainment or shopping. While the final 20% should go into a savings account or investment portfolio. If you’re struggling to hit this target ratio, focus on eliminating expenses from the ‘wants’ category.
Take an honest look at how much money you’re bringing in each month after taxes. If you’re not making as much as you’d like, consider ways to make a bit extra on the side. You’ll need to put in the work to commit to your budget. Rest assured, it’ll be worth it once you begin to see the results.
Logging In To Your Accounts Daily
You should always log in to your bank accounts daily to review what is going on with your finances. Most of us don’t like doing this but its a crucial aspect of maintaining financial health.
Staying in the know on when money is coming in and going out can also help you avoid overdrafts. The MoneyLion app makes it super easy with income and spend trackers and weekly spending reports, so you can track all your accounts in one place.
If you see that your balance is a bit low, you might have to cut out unnecessary expenses. It’s probably a good idea to skip your morning coffee or reschedule that happy hour with friends. You might have to wait until payday or use a service like Instacash to get a free advance on your next paycheck or unemployment check.
Checking on your accounts daily is also a great way to catch overcharges or other billing mistakes. You might find you’re being charged for a subscription service you thought you had canceled. Or that some of your bills are a lot higher than you expected. The best way to get in control is with frequent check-ins.
Automate Your Bills
Have you ever treated yourself to a nice dinner only to find out the next day that the money was supposed to go towards a bill you completely forgot about? This scenario is all too common. The best way to avoid this is by automating your bills.
Automating your bills will help you keep track of exactly how much money you have available to spend. This makes it easier to avoid overdrafts on your account and avoid late fees on your bills. Even though overdrafts won’t affect your credit score, paying your bills late can be detrimental to your credit.
Nowadays, you can automate your rent payments, cable bills and more. Get in touch with your providers to ask about automating your payments ( you might even get a discount!). Doing so will make it easier to manage your finances and might even cut out some unnecessary costs.
Sometimes, your account may go into overdraft not because you haven’t been keeping track of spending – but because your bills are piling up fast. If you have bills coming up and you don’t want your account to go negative, request some Instacash.
Instacash is an interest-free, short-term advance on your next paycheck or benefits check. It’s a cheaper, safer alternative to traditional payday loans. Instacash is easy to use and works instantly. You can use Instacash at any time and anywhere through MoneyLion’s mobile app.
Get up to $250 deposited into your checking account, better yet – a RoarMoney account, and pay it back when you get your paycheck. There are no additional charges and no interest, and you can use Instacash as often as you need.
Choose A Bank That Works For You
Are you tired of the excessive monthly maintenance fees and overdraft penalties your bank keeps charging you? MoneyLion can help. MoneyLion offers a host of resources and tools to help you manage your money. You can build your credit, get Instacash, invest, access financial educational material, and enjoy many other perks. MoneyLion is more than your average bank!
MoneyLion’s RoarMoney account offers an instant debit card, charges no hidden fees, can deposit your paychecks up to two days early, offers debit card rewards, Mastercard Price Protection so you can get price-drop refunds, and more.
Everything is done digitally, and you can manage your accounts online and through mobile banking. Banking with MoneyLion is always secure and your deposits are FDIC-insured. This is a new era of banking that will empower you to make your finances roar.