Use these tips to avoid overdraft fees

New rules that kick in this August require banks to substantially change one of their most-loathed policies: automatic enrollment in an overdraft “protection” plan that lets a transaction you don’t have money to cover go through, then zings you with a $35 fee. The rules mandate that people will have to opt into these programs; banks can’t enroll you automatically and without telling you. As we already warned you, banks are hitting back by sending customers letters making it sounds like they have to opt in for this “protection” or that something terrible will happen if they don’t.

Well, our earlier advice still stands: You don’t have to and shouldn’t sign up for overdraft protection. But don’t just take our word for it. Susan Weinstock, director of the financial reform campaign at the Consumer Federation of America, tells Walletpop there are other, less expensive ways to get short-term credit without having to incur a $35 fee each time. This article outlines several of those methods. Here’s the bottom line:

The first and best way is to keep track of your spending. You can use an old-fashioned check register, check your balance online daily or sign up for alerts. Many of the major banks now offer you the option to get a message on your cell phone when payments are posted to your account or when the balance in your account drops below a predetermined limit.

If you’re thinking about signing up for overdraft protection so your card doesn’t get denied and leave you stranded, carrying a backup credit card isn’t a bad idea, as long as you’re disciplined enough to pay off that charge by the due date so you don’t get hit with finance charges. For hotel or rental-car reservations, which can lead to a hold being placed on your card for a sometimes significant amount, a credit card is also a better pick so that hold doesn’t lead to your account falling into the red.

Finally, we’ve told you before about alternatives to overdraft protection that link your checking account to a savings account or line of credit. While banks do charge for this service, it’s generally a lot less than an overdraft fee, which makes it a viable alternative if all else fails. “The Consumer Federation of America is urging consumers to say no to overdraft fees” by opting out of your bank’s offer of “protection,” Weinstock says. After all, you work too hard for your money to hand it over to the bank $35 at a time.