If your payments and purchases are more than the available balance in your checking account, your transactions may be declined, paid into overdraft, or returned unpaid. While the solution is simple – don’t withdraw or spend more money than you have – today’s checking accounts allow you more ways to access your account than ever before. For example, you can use a debit card to make everyday purchases or withdraw money from an ATM. You can also pay your bills by authorizing a company to automatically deduct money from your account on the due date or send a bill payment online. Understanding different payment methods and other options to manage your account can help you avoid overdrafts and the corresponding fees.

Understanding how these payment methods differ can help you avoid overspending. Depending on the type of payment or purchase method you use, the time it takes for the transaction to be paid from your account can be different.

Some payment options let you determine when a payment will occur.

For example, if you use Online Bill Pay, you can choose the exact date when funds will be withdrawn from your account to pay a bill. Or, if you authorize a company to make recurring automatic payments from your account (for example an insurance payment or gym membership fee), the company tells you the date when the payment will be processed from your bank.

Other payment options have more timing uncertainty.

If you write a check to a friend, she may cash it immediately or set it aside for several weeks before depositing it. When you use your debit card at the local store, the merchant will immediately request authorization for the purchase to make sure you have enough money in your bank account at that time. However, it may be several days before the merchant actually settles the final purchase amount with the bank and the funds are withdrawn from your account.  When the bank approves the transaction, we guarantee the merchant that the transaction will be paid from your account. These payments may result in overdrafts.

When tracking your account, you should make note of any outstanding obligations in your transaction register. Automatic payments are convenient for avoiding late payments, but they can also make it easy for you to forget that you have an outstanding obligation. If you have authorized a company to make automatic payments from your account, make sure that you know the exact date they will occur and make note of it in your transaction register.

Understanding your available balance

At Wells Fargo, you can find your checking account’s available balance online, at the ATM, or through your mobile device. This is the most current record we have of the amount of money in your account available for your use or withdrawal. However, your available balance includes only the authorized or pending payments that Wells Fargo knows about. You may have authorized transactions that will make the amount truly available for your next purchase lower than what is known to us.

Transaction Type
When the bank knows
When you know
The amount is known only when presented for payment
When you write the check and record it in your check register
The amount is known at withdrawal
When you complete the withdrawal
Online Bill Pay
The amount will be deducted from your account on the “send on” date you specify
When you specify the amount and payment date in scheduling your bill payment
One time debit card purchase
The authorized amount is known when you make your purchase. Final amount is known when the merchant submits the transaction for payment, typically within one to three days
When you make the purchase with your debit card
Preauthorized automatic debits
The amount is known only when presented for payment
When the final amount, payment method, and debit date is scheduled

Write it down

What is one of the best ways to avoid having a negative balance or an overdraft? Write it down.

Know all the outstanding obligations you have and consistently write them down in your own personal transaction register. It doesn’t matter whether you use an online tracking tool or a paper-based register. What does matter is that you faithfully record every deposit, withdrawal, and purchase in your register and keep a current, accurate record of the money you truly have available. Always consult your personal transaction record before making your next purchase or withdrawal.

Additional tips to avoid overdrafts

Keep a cushion in your account to cover payments that you may have forgotten to record in your personal transaction register. You can also set up alerts to help notify you by email or text when your balance goes below an amount you specify. Also consider using mobile apps to monitor your balance while you’re on-the-go.

Finally, in addition to all of these tips, you might consider using Overdraft Protection. For example, at Wells Fargo, when you link an eligible savings or credit account to your checking account, money can be automatically transferred if you don’t have enough money in your checking account to cover a transaction.

Additional things to keep in mind:

  • If you use your debit card to authorize an online purchase, be aware if the merchant notifies you that an item is on back-order. If so, the debit card you provide may not be charged until the item ships. This may be weeks later when you have forgotten about the purchase. Make a note of this purchase in your transaction register at the time of purchase.
  • Using an online bill payment service may help you keep track of your payments. Rather than authorizing a company to “pull” money from your account on the due date, you “push” the money from your checking account and can determine if you have enough money before sending the payment.
  • Wells Fargo offers services, such as online and mobile banking and text alerts, that help you monitor your available balance. Keep in mind that your available balance does not include transactions that we don’t know about yet, for example checks you have just written or the car payment you just authorized. Only you know all the transactions that will affect the balance you have available for making that next payment.

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