College and post-college years can be lean times for your bank account. If you’re monitoring your account balance and trying to live within your means, it should be easy to avoid overdrafts, right? Not necessarily. Your bank’s policies and your personal account settings play a big role in whether your transaction will be approved or declined, and whether you incur a dreaded overdraft fee.

How did this happen?

If you make a purchase or withdraw cash and you don’t have enough funds in your account, your transaction may decline. This saves you from paying an overdraft fee, but it’s embarrassing to be told that your card has declined. An overdraft protection plan can help you save face in public, but will cost you behind the scenes.

Styles of overdraft protection plans:

• Standard Overdraft Coverage
  If you opt for overdraft coverage, your bank covers overdrafts for a flat fee. If you overdraw on multiple charges, you’ll pay an overdraft fee for each one. Beware, this can add up quickly.
• Overdraft Protection Plan
  Your bank may offer a line of credit up to a certain dollar amount to cover overdrafts. Each transaction may result in a fee. Some plans allow you to transfer funds from a savings account to cover transactions, in the event of a zero balance, and in this case, the transfer fee may be lower than a regular overdraft fee.

Timing Matters

Debits and credits to your account may not be processed in chronological order. Some banks post the largest debits (purchases or withdrawals) first, followed by credits (deposits). The check you deposit at 8 a.m. may actually be credited to your account well after purchases you make later in the day.

Ways to Avoid Fees

• When you open a bank account, make sure to read the fine print on your Account Agreement
• Find out your bank’s policy on Posting Order – do they post credits or debits first, and in which order
• Keep track of your balance online and make records of your transactions
• Find out what kind of Overdraft Protection Plans are available to you
• If you opt out of overdraft protection, it’s impossible to overdraw your account, but be prepared to hear that your card has declined