Photo by James Callan

It used to be you could balance your checkbook, monitor your ledger and not have to worry about overdrawing your checking account. But the widespread use of debit cards, combined with bankers greed, have led to a surge in overdraft fees that make it difficult to ascertain your exact balance. Banks and credit unions collected nearly $24 billion in overdraft fees last year -- up more than 35-percent from just two years ago.

You can reduce your chance of receiving those alarming overdraft-notification letters by arming yourself with a little knowledge to regain control of your checking account. Here are six ways to protect yourself from debit-card overdraft fees.

1. Learn your bank's policies. Surprise, surprise -- your bank will continue to withdraw money, even if you don't have sufficient funds. Your debit card use may be approved even when there isn't actual money in your account. Thirty-five percent of banks and credit union let customers overdraw their accounts at ATMs or with debit cards, and charge anywhere from $20 to $35 for the privilege.

In another tricky maneuver, large banks like to process the largest charge they receive first, despite the order in which it was purchased. So if you make two charges for lattes before you buy a flat-screen television, the bank will likely process the television charge first and you'll be hit with two overdraft fees for the coffees.

2. Shop around for the best overdraft policies and fees. In general, you'll find smaller banks and credit unions have lower fees and fairer policies, but don't ignore the larger chains. Bank of America recently announced it would not charge overdraft fees on more than four items per day. Nor would it charge fees on an account overdrawn by less than $10 a day. J.P. Morgan Chase  followed suit and said it would levy overdraft fees no more than three times a day and would not charge overdrafts on accounts overdrawn by less than $5. You can still be slammed with an overdraft fee, however, should your account hit $5.01 in overdrawn funds.

3. Danger lurks at a point-of-sale terminal. Every time you make a purchase at a store with your debit card and it's approved at checkout, another screen pops up asking if you'd like cash back. This makes it handy to grab some cash without paying any ATM fees, but by clicking on that "Yes" button, you could be overdrawing funds without knowing. These POS terminals don't indicate your bank balance and won't signal if you're about to pull out too much money. According to The Center for Responsible Lending, these POS transactions are the leading cause of overdrafts, generating about 35 percent of such fees.

Photo by ame nielsen

Debit cards are so easy to use and it's just like paying with cash...right?

Not always.

While you don't pay interest charges with debit cards, as you do with credit cards, there are other hidden costs associated with their use. Here are some dos and don'ts you'll need to know when using your debit card for holiday shopping.

1. DO watch how much you spend.  It's very easy to get hit with overdraft charges when you're not keeping an eye on your balance. New laws restricting over-limit fees on credit cards don't apply to overdraft fees on debit cards. With such fees skyrocketing of late to $35 per overdraft, you can find yourself in a very big hole very fast. Watch out for banks that automatically enroll you in overdraft protection programs, as well. These often carry an annualized interest rate that exceeds 3,500 percent. Don't forget to figure in automatic withdrawals to pay monthly bills when calculating you're balance.
2. DON'T use debit cards for large purchases. Debit cards don't offer the same protection as you receive with credit cards. Nor do they allow you to reverse or dispute charges. Some credit cards even offer an automatic extension of warranties.
3. DON'T use a debit card online. If you lose your credit card or have your identity stolen, your liability for unauthorized charges is capped at $50, while the cap for debit cards can run as high as $500 if you don't report the loss within 60 days. If you haven't reported the loss within 60 days, you may be responsible for all charges made until the report is filed.
4. DO click on "credit" and sign for payments, instead of using your PIN. Some card companies extend the same zero-liability protection to debit cards as they do to credit cards, if the debit cards are processed as credit cards. PIN transactions may not have that protection.

Photo by Globetoppers

My grandmother was one thoughtful gal.  Perhaps it was her early breast cancer diagnosis and survival that gave her a healthy perspective on the importance of life.  She became an expert pianist, taught Sunday school, and served as principal of an elementary school for fifteen years.  Although they started dirt poor and worked in public sector jobs, she and Grandpa willed over $1.5 million in invested assets to their kids upon their death.

They were the post-depression kids who ate potato soup and butter sandwiches for a decade.  They reused aluminum foil shamelessly.  So it surprised my socks off when Grandma said she would "in a heartbeat" go into debt to travel the world.  My grandma?  The one who saves every piece of gift-wrap paper to use later?  The same lady who drove a ten-year-old car and walked to the grocery store to save gas?

Without blinking she completely agreed that debt wasn't that bad of a thing for some special occasions.  Knowing her character, I suspect she didn't mean to incorporate it as part of a regular financial routine, but rather to have a healthy perspective of spending.  Just where do we draw the line for wallet splurges?

• Growing a Family

On my husband's trip to Africa, the most frequent question asked by men in the local tribe where he volunteered was about children.  "Why do Americans only have one or two children?  You have so much money."  Peering into a one-room hut with seven children, he couldn't muster a decent response.  The old adage rings true: if you wait for complete financial stability to have kids, you will die childless.  We have become confused in our culture to equate children with huge expenditures of money.  Don't get me wrong--it does cost extra money to grow a family.  But not the quarter million that sensationalist media makers like to proclaim.  You may have to forgo the $400 jogging stroller or electric wipe warmer.  Sacrifice is key here, not over-indulgence, which is what most of us assume is required.

The Splurge: Maternity coverage and baby medical bills will top the list of potential debt crashers.  But aside from less expensive (and potential more risky) options like home birth, they are unavoidable.  Stick to cloth diapers, breastfeeding, and second hand stores for all baby gear.  If you are really low on cash, contact your local police department--they often have a surplus of donated car seats that haven't been in an accident.



• Special Travel

No, no, my quicksilver credit card swashbucklers.  This is not a free pass to rack up debt on a yearly vacation to the South Pacific.  And I don't recommend charging the entirety of your trip, regardless of merit.  But some travel can't be postponed--you just have to make a wise call.  I especially don't recommend jet setting if you have a mound of extra debt hanging over your head.  It's far more difficult to enjoy a trip if you're plagued with bills at home.

The Splurge: Consider traveling to other countries if you have friends or family who can put you up for no cost.  Temporary military or time-share placements would allow you to visit whereas you could never afford it.  Seeing family for health or celebration purposes would also be a legitimate reason to pay in plastic money.

Photo by woodleywonderworks

Now that I’m a parent, I think about things like how to teach my kids about money. Most people agree that children should do chores around the house and help out in age-appropriate ways. And most people also agree that it is valuable for children to receive an allowance to start learning about the value of money. But, it turns out, there is quite a bit of debate over whether or not an allowance should be tied to doing chore. First things first – I had to rid my mind of the image the word “chores” conjured up in my head – for some reason I equate it with churning butter, but I know in today’s world it is more likely to correspond to TIVO management. Though I understand the concept of wanting to teach kids that they have to earn money, I’m not into the idea of paying them do everyday things that are expected of members of any household. It didn’t feel right to me to tie an allowance to basics like making the bed.

I concluded I was comfortable with giving a weekly allowance, but then having room for the child to earn extra money by doing special “paid” chores – basically, things I normally hire someone to do, like wash my car. Some of these “big jobs” which are tedious to me are SO much fun for our kids! Our boys washed our car the other day (with a little help) and you’d be surprised what a great job a 4 year old and 20 month old can do! More than that, they had a great time and were so proud of the job they did. By tacking on a financial incentive to this great lesson in self-esteem, not only will I get a clean car, but my boys will start to build their concept of work and earning money.

Photo by MENE TEKEL

Don't get sucked into "easy" credit--there's no such thing!  Keep a wary eye out for these deceptive credit strategies that will nickel and dime your account to death:

1. No Interest on Furniture Loans
Impressed by those "no interest until 2015" ads?  Before you sign off on a mound of debt there are several surprises hiding inside the fine print.  If you qualify for a loan term with no interest, you must pay back the entire balance within the specified period.  If by the end of your term you still carry a balance for your furniture, all the interest since the beginning of the loan will be added.  Even if you only owe $20.  Plus, if you're a minute late making a payment, interest will kick in for the entire loan.  What seems like a good deal can quickly sour if your bill arrives late or if the billing department "somehow" didn't receive the bank draft.  Your best bet is to save up cash for your furniture and avoid sleepless nights.

2. Making Minimal Payments
There's a reason credit card companies set a minimum payment for your credit card.  They're trying keep you locked into some sort of payment for the rest of your life.  The minimum payment usually covers only the finance charges on your debt, so you can literally pay indefinitely and make no headway.  While it's better than paying nothing at all, try to aggressively attack your debt and set a time limit to pay it off completely.  Carrying a balance is never a good idea.

3. Late Payment Consequences
One or two days late making a payment is no big deal, right?  After all, your biology teacher let you slide on getting your project in on time.  Welcome to the world of cutthroat profits.  Credit card companies love it when you pay late.  Not only do you get slapped with a fee, but also they can hike up your interest rate to an obscene percentage.  Not to mention it reflects negatively on your credit score.  Our lesson to learn here is pay early to avoid risking huge fees.

4. Cash Advance Charges
Have you ever used those nifty "checks" sent by your benevolent credit card company?  They seem so easy to use.  This brilliant marketing strategy comes at a huge cost to gullible customers.  First off, they aren't truly checks--you don't have the money.  These cash advance checks have a minimum purchase, usually $75 or more, and they charge a revolting 3% interest on top of your regular finance charges.  How sweet of them to help you out in a pinch.  Rip up the checks before you have a chance to consider using them.

Photo by dimiqueen


Whether you're a Dave Ramsay junkie or trying to learn from some big mistakes in your spending habits, it's no secret that using credit cards encourages more spending.  But I have to assume that you have some clue about how important a budget is to curbing your spending before reading this.  Both credit cards and cash have major benefits and drawbacks. 

If you have a problem with over spending, deciding between cash only or credit/debit card exclusive systems is like trying to stick a Band-Aid on a gushing artery.  You can't renovate what you don't own--so get a grip on a budget first.  Once you're set with monthly expenditures, take a close look at your credit car bills and cash spending.  Above all: to thine own self be true.  Know your natural inclinations to spending and adjust to reduce it.

Once you're ready to take a stand, consider the following:

The Pros to Cash Only:

•  Cash is finite. Your credit card limit is too, but assuming an outrageous spending limit will only incur huge finance charges.  Once you run out of dough for the month, you're done.  This means no furtive, late-night dashes to the ATM.  If your budget is up for the month, train yourself to not buy anything else.  Just as with starting exercise, you'll have some soreness at first but the repetition and strength of habit will make it easier in the future.

      
• Cash is accepted everywhere.  Our card of choice, American Express, is not.  Plus the swipe machines go down occasionally and you won't have an option then either. 

      
• Avoid late fees.  Even if you pay off your credit card bill at the end of the month, quirky things happen.  Bills don't arrive on time or get lost.  If the unexpected can happen, it will.  Credit card companies thrive off late fees and even one late payment can mess with your interest fees.  When you pay with cash, the transaction is completed immediately.

      
• Cash is convenient for random expenditures like tips and split bills at restaurants.  No more worries about having an extra dollar or two on hand for cash only needs.

Apartment hunting can beat you down.  Just try a casual online search for apartments in your target area and you'll be snared into a web of locators who will poach your inbox and cell phone with reckless abandon.  No, apartment hunting is not for the faint of heart, and if you don't know your way around the industry you'll pay for your ignorance.

Renting is an attractive option right now if you are short on cash and need a place to stay.  Sure you'd like to buy with housing prices so low, but unless you have a healthy 15% or more for a down payment you may be safer to rent and build up wealth first.  Apartment prices have not tanked, at least in most cases, but they have become more competitive.  It's much easier to qualify for a lease now, even if you've broken leases or declared bankruptcy in the past.  The current economic climate has encouraged a more lax approach to accepting tenants; so don't assume that some bruises on your financial history will keep you out of a nice community.

Although the following list is not exhaustive, it will give you a good idea of what you can negotiate when signing a lease.  Most apartment owners have complicated systems that issue different prices for available units each day.  It's not like buying a car--the leasing agent and manager can only do so much.  These perks and discounts may or may not apply in your area, but it can't hurt to check them out.

1. Look and Lease Specials
The most important piece of information is to do your research well in advance before setting foot on property.  Do your own drive through (if you can sneak through the gate), look at floor plans online, research apartment ratings, and call for availability ahead of time.  One of the deals you can sometimes score is a 24-hour look and lease special--the leasing agent shows you the property and will offer it below market rate if you sign a lease within a day. 

2. Shop Around
Take your floor plans and pricing sheets with you to compare places.  After seeing half a dozen they all blend together.  The bottom line rent may not be the whole picture.  Find out what is included and what is extra.  Does the community have a functional gym that can save a $40/month membership fee?  Are all bills paid?  What cable company and electric companies are allowed on site and how do they compare?  How much are the initial fees?  Keep a spreadsheet to organize your information.

3. Free Move Locators
Depending on your area, apartment locators can have a tremendous impact on your up-front costs.  Some of my favorite locators are ones that provide an additional service for you, like a free move.  I have moved twice with an apartment locator service that offers complimentary movers and truck and it has saved up to $300 each move.  You might have to enlist your buddy with the pickup for some extra valuables and furniture, but it is well worth it.  To take advantage of it you must tell the leasing agent who referred you upon showing, since the locator service is only paid when they are listed as the referring locator.

4. Fees Negotiable
Administration fees, pet deposits/pet rent, and other initial fees can add up to $500 or (much) more.  For additional bargaining power, know that management can curtail many, if not all, of them.  Some fees will be waived as part of a special, but it's always good to inquire if you present yourself as having to choose between several communities.

5. Renewal Tips--renewal party, money off 1st month
After you've lived in your pad for the entirety of your lease you may notice that Average Joe walking in from the street can get a better deal on a unit than you, a proven, reliable tenant who pays early each month.  This will infuriate you and make you feel like a number.  Apartment owners assume that you're willing to pay a bit more the following renewal period since moving is such a hassle.  Be proactive and find out what specials the new move-ins are getting.  Request the same deal and threaten to jump ship if they don't honor it.  Also stop by the renewal parties, if your community offers them.  Many give away one month free of rent, washer/dryers, or even flat screen TVs (plus you get a free meal out of it). 

So the bank has clearly let you know you're in the red.  Even if you aren't barraged with phone calls from late-night angry creditors, living from paycheck to paycheck is not a wise long-term plan.  

You probably know your need for a financial overhaul, but don't know where to begin.  Your pre-plan step is admitting your (literal and figurative) deficit.  You might even need to seek guidance from a support group.  But give budget planning a little time--see just how far you can stretch a buck with some forethought.

Step 1: Write down every debt you have in one column of a spreadsheet.  Leave nothing out. That CD player charged to your Radio Shack credit card fifteen years ago?  Write it down.  Student and car loans count as debt too.  I know this is tantamount to stepping on a scale.  But if you can't accurately describe the ugly beast in the mirror, you'll never be aware of the need to change.  Totaling up the damage must come first.

Step 2: Add a second column to your spreadsheet that includes your regular and irregular monthly expenditures.  Include everything from the utility bill and medical bills to food and gas.  A couple of hints to help you include everything:

• Keep all receipts and bills for one month.  Buy a spike receipt holder or empty basket and put each bill of sale in it religiously. This means caffeinated drinks and last minute bean burritos too.
• After one month separate the variable costs (food, gas, clothing, etc.) with fixed costs (insurance, mortgage).
• Carefully inspect your variable costs.  The good news is you'll easily be able to cut more and more each month.  Set a goal for expenditures under each category and check it after the second month.

Step 3: List all sources of income in another column to the right.  After totaling your monthly bills, you'll have a good idea of how much money you have to pay off the debt.  If you have hardly anything left over for debt payoff, something has to give on your expenditures.  Car payment?  Sell it.  Even if you're in the red.  Buy a clunker and pay off the rest--you'll be better in the long run.  You might need to sell the house and rent or lower your rent.  Getting a second job for a few months may also be a wise course of action to jumpstart things.  This temporary pain is just that.

Step 4: Before you start slashing things and mixing numbers around, you need a small cushion of a few hundred dollars in the bank.  If you don't have it, the clouds will definitely roll in.  Do this before attacking your debt--and, no, you may not use it for a "last minute" vacation or "desperately" needed shoes.  Leave it for car repairs and health needs.

What would you do if all of a sudden you ended up with an additional few million dollars in your bank account without having won the lottery? Clearly, banking errors do happen, after all, there are human factors at work, but sometimes the errors are made by computers too and therefore we must always check our statements to see if things are as they should be. The following top 5 biggest banking errors take centre stage as some of the dumbest errors ever having occurred:

1. Early Retirement Or Jail?
Fancy applying for a $7,800 overdraft from your bank and ending up with a $7.8 million deposit in your bank account instead. What would you do if that happened to you? As it did, the lucky - or not so lucky - New Zealand couple at the centre of this ginormous mistake did a runner.

Authorities are now pursuing them. The question is, where would you hide with so much money?


2. Salary Bust! Three Years Mislead By Banking Employer!
One UK bank employee had to find out that the salary she was drawing for three straight years from her employee - Barclays Bank - wasn't meant to be what she got paid. It took the bank a total of THREE years to figure out that part-time complaints adviser Natasha Keenan, 36, got paid almost double her salary. Her yearly salary was £17,000 when in fact it should have been only £9,500.



What makes this even more so a joke is the fact that Mrs Keenan applied for a mortgage with her erroneous payslips which was granted and she also got a new credit card from a work reference. When the bank demanded their wrongly paid money back after three years, Mrs Keenan took her bosses to tribunal.


3. Work But No Pay! Rough Wake Up Call.
A total of 10% of the people in New Zealand paid by the largest bank’s corporate banking system experienced a rough wake up call when they learned there was no payment in their accounts. The blame was put on an "operator error during the bank’s overnight batch processing." Hmmm... what say you?

In the land of bailouts and economic stagnancy we, as bank customers, are in prime position to be taken advantage of.  Banks have extreme pressure to boost numbers as interest revenue is falling in relation to total revenue.  The only surefire way to do this is by adding new charges, fees, and penalties, or increasing the ones already in place.  They will (re)introduce them sneakily and with fuzzy names.

A myriad of fees including overdraft and late charges have increased 35% of their income since 1995 and they are expected to soar even more in the future.  Bounced check fees have also increased for repeat offenders.  And let's not even begin to discuss credit cards--a whopping $19 billion this year in fees alone, which is 80% higher than in 2003.

Fear not, frugalites.  If you've chosen to live aware of your monetary surroundings and sharpen your eye for deals, this sneaky phenomenon will not pull one over on you.  Check out these bestselling financial fees and what you can do to combat them.

1. Overdraft Charges
Here's an easy bookkeeping fix.  If you know how much is funneling out of your account, it's easy to see when you're in the red.  Keep a running record of your account and check it frequently online.  Your friendly bank representatives are waiting for you to make a mistake, so be proactive.  Not surprisingly, Bank of America (a beacon of economic meltdown) has raised overdraft fees from $20 to $35 per returned item.

2. Checking Fees
But wait, didn't banks ditch those ridiculous charges during the last decade?  Yes, but they are slowly emerging once again.  Citigroup has recently tacked on a 3% debit charge at several locations and for purchases made outside of the U.S.--which actually makes it just as costly as using a credit card.  Bank of America's MyAccess monthly fee has increased from $5.95 to $8.95.  Bankrate.com says fees have continued to rise from their all-time high in 2008, so we can expect to see similar increases in the near future.  Review your bill with a fine-toothed comb and find out ahead of time what you can expect to be billed for.

3. Human Interaction Charges
Some institutions have limited customers to a twice-monthly teller visit and then charge extra for additional contact!  Similar reports of phone call fees are on the rise.  Most of these charges tend to be for excessive use, interpretation vague and probably not up for discussion.  Demand for unlimited access to your funds via live interaction or switch to a smaller bank that still values the customer.