Contrary to what many people may believe, it is very possible to exceed a balance on a debit card. Otherwise known as overdrafting, it can result in additional penalties being assessed to the account and can damage the user’s credit score. There are ways to avoid this unfortunate experience, however, and a list of useful tips is detailed below.
- Link to savings. Most debit cards are simply an extension of a cheque account, wherein the account holds the money while the debit card gives the account holder easier access to those funds. Instead of stopping by their bank each time they need to make a withdrawal, the debit card allows the user to charge the transaction to their card, which then debits their cheque account. Cheque accounts have limits, of course, and as such they are at risk of overdraft. However, most banks allow debit card customers to link their cards to their savings accounts. Savings accounts typically hold funds which are put in reserve and left untouched while they gathers interest for the account holder. When coupled with debit card accounts, however, a savings account can act as overdraft protection facility. This means that if the debit card user ever accidentally breaches the amount of money that they have in their cheque account, the bank will automatically deduct the exceeded balance from the user’s savings account. This spares the debit card holder from having to pay overdraft fees and can preserve their credit score.
- Link to credit card. If the debit card holder has not opened a savings account, most banks will extend them the option of linking their debit account to a major credit card. This works much like linking the debit card account to one’s savings account. If the debit card user goes over the available balance in their debit account, the bank will automatically charge the credit card that the user has on file. The extra funds will be drawn from the credit card and will show up on the customer’s next credit card statement. Just like linking to savings, this method saves the debit user extra money in overdraft fees, some of which can accrue on a daily basis until the exceeded amount is repaid depending on the bank. While this is a convenient feature of debit card accounts, customers must be cautioned to also keep their credit card balance well below their credit threshold as well. If they spend too closely to their limit on their credit cards and then exceed the limits on their debit cards, they may end up overdrafting on two cards instead of only one.
- Balance notifications. In the event that the debit card holder owns neither a credit card nor a savings account, they have the option of signing up for balance notifications to be sent to them via email or text message. These notifications can alert the customer when their available balance reaches a certain amount, thus allowing them to take greater caution with future spending until they can replenish their accounts. Users are able to set the amount for which they would like to be notified rather than have the banks set it for them. For instance, if a debit card holder feels more comfortable being alerted when their balance reaches $200, they can set the limit at this amount and expect to be notified accordingly.
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