Ask a Nerd: How Can I Avoid Overdraft Fees From Overspending?

If you’re like me, this week, you’ll probably feel the same thankful I-don’t-need-to-shop-this-much-again-for-another-year sigh of relief. But even when the year-end holidays have passed, you might still be seeing the ghosts of all your purchases on your bank statement, especially if you overspent to the point of overdrafting and are dealing with extra fees.

Leaning on overdraft coverage — where you spend more than you have in your checking account and have to rely on your bank to pay for your transaction — as a remedy for overspending can be costly. Many overdraft fees are $30 or more per occurrence, and you may be hit with that fee multiple times if you keep spending. Here are your options for overdraft protection and some tips on how to avoid overdrafting during the next big spending season.

Common overdraft protection options

Here’s my quick breakdown of the overdraft protection options that banks typically offer:

Overdraft protection transfersMany banks will let you link your savings account to your checking account and pull in your savings to cover the cost of an overdraft. Be careful, though: Banks sometimes charge a fee for this service.

An overdraft line of credit. Potentially a very costly option, an overdraft line of credit will cover the cost of your overdraft but will likely have an interest rate that is comparable to that of a credit card.

A grace period or buffer amount. Many banks are introducing longer grace periods where you aren’t charged a fee for a day or two after your overdraft so you have time to add money to your account. Some banks are offering buffer amounts, meaning that overdrafts are covered up to a certain amount, like $100, until you’re able to put more money into your account.

Opt out. If you don’t want to deal with the hassle of worrying about overdrafts, you can opt out of all coverage options and your bank will simply decline any transactions that would result in an overdraft. You’ll avoid fees this way, but it can also be awkward if your debit card doesn’t go through when you’re trying to make a purchase.

Banks are taking steps to make it easier for customers to handle overdrafts, but there are also plenty of tactics that can reduce the chance of an overdraft.

Prep for the future to avoid an overdraft

Here are some other tips for avoiding overspending:

Set up low-balance alerts. Most banks allow you to set up low-balance alerts, where your bank will text, email or send a push notification to let you know when your account drops below a certain threshold, like $50. This service can give you a heads-up that you need to be careful with your spending.

Keep an eye on automated payments. Automatic subscriptions and bill pay can be a surprise, making a low balance and an overdraft more likely.

“Keep track of any and all auto payments that regularly occur, and plot them on the calendar to remind you when they should be coming,” said Nia Adams, a personal finance educator at Perspectives, via email. “Many times, funds come out on different days depending on when weekends and holidays fall.”

Shop for a bank with a better overdraft policy. If your bank is particularly harsh with its overdraft fees, now is a great time to shop around, as many banks are reducing or eliminating their overdraft fees.

Budget for the next holiday season. Perhaps holiday spending is a regular tripwire for your budget, and overdrafting becomes a higher risk for you at that time of year. If that’s the case, you might want to reevaluate how you spend on gifts.

“Create a holiday-specific plan,” said Patrina Dixon, founder and CEO of It’$ My Money, via email. “Try to lean towards sentimental gifts as opposed to expensive ones.”

She suggested framing photos from happy memories with your loved one.

“Or,” she added, “make a list for gifts by person, and add an actual gift suggestion and max dollar amount you plan to spend for each. Be sure that total is noted in your budget.”

Consider using a prepaid debit card. If you want to put the guardrails up on your spending, consider getting a prepaid debit card during a spendy season. Since the card isn’t linked to an account, you won’t be able to overdraft, and you’ll be able to use the card like a regular debit card.

Budgeting takes a lot of willpower, and the holidays can be a crucible that tests your spending habits. But with some planning and account setup, you can be better prepared to handle the expenses that come with the season.

Chanelle Bessette writes for NerdWallet.

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5 Tasks for Your Year-End Credit Card Checklist

December is an ideal time to make sure you’re maximizing any credit card benefits that may reset or expire at the end of the year. This is especially true if you’re paying for those benefits through an annual fee. It’s also a good time to review your spending habits to make sure the card you’re using is right for you.

Here’s an end-of-year checklist that can help ensure you’re getting the most out of your credit card.

1. Use your credits

Some credit cards offer statement credits for certain types of spending throughout the year, but terms and expiration dates tend to apply. If it’s a recurring credit, it’s often a use-it-or-lose-it perk, meaning you can’t roll over any unused amount to the next month or year.

If the recurring benefit is awarded annually, it’s also important to know whether it resets each calendar year, or on every cardholder anniversary, the month or date you opened the account. Either way, aim to make your purchase a few days before that date so that it posts to your statement on time. Pending charges that officially post afterward may not qualify.

And as with any credit card benefit, don’t overspend on goods or services you don’t want or need just to get a small discount.

Types of common credits include:

  • General travel purchases: Many rewards cards offer travel credits to offset eligible travel purchases at airlines, hotels, cruise lines and car rental agencies.
  • Airline incidentals: If you’re traveling over the holidays, you can typically apply airline incidental credits to checked baggage, seat upgrades, and in-flight purchases like food and beverages.
  • Streaming: Credits for streaming services like Netflix and Spotify have become commonplace. Often, these are distributed on a monthly basis. “We pay for Hulu, HBO Max and Paramount Plus using the streaming credits on our card,” said Deb Toner, a resident of Albuquerque, New Mexico, who works in the TV and movie industry. “Because of the cost of annual fees, I want to make sure I get every single penny out of it.”
  • Lifestyle: This may include credits for food delivery services, fitness subscriptions or rideshare services.
  • Miscellaneous: Your card may even offer credits at specific department stores, online retailers or subscriptions.

2. Maximize any bonuses linked to spending

Some airline and hotel cards offer benefits like upgraded loyalty status or free night certificates once you spend a certain amount per year on your card. If you’re close to a bonus spending threshold, ask yourself if the benefit would provide enough value to warrant additional spending on the card before the end of the year. If so, you might want to prioritize hitting that target.

But you’ll want to have a plan for using the loyalty status or the free-night certificates before you chase them.

3. Review free trials that may be expiring

Many credit cards offer free introductory trials for premium subscription services at food delivery or rideshare companies. Even if your trial doesn’t expire at the end of the year, now would be a good time to review the promotion terms and — if you’re not interested in keeping the service — set a calendar reminder to cancel it before you’re charged for another year.

And of course, free trial or not, the end of the year is also a good time to review the services you’re already paying for, to make sure they’re still worth it.

4. Consider dusting off unused credit cards

If you stuck your credit card into a sock drawer to avoid the temptation to overspend with it, you may be better off keeping it there. But be aware that many issuers will automatically close credit cards that have been inactive for an extended period, and that closure can come with consequences.

That’s because two big factors that affect your credit scores are credit utilization and length of credit history, and an account closure can negatively impact both.

Credit utilization is the percentage of your available credit that you’re using, and ideally you want to keep that figure low. Losing a line of credit might make that harder to do. “If closing a credit card removes some of the available credit and makes the revolving utilization increase, it could result in a loss of points” from your scores, said Tom Quinn, vice president of FICO Scores, in an email.

And an account closure may also drag down the length of your credit history, depending on how old that account is.

“Bottom line — there is no FICO score benefit associated with closing a revolving account,” Quinn said.

5. Look behind to plan ahead

As the year draws to a close, review your spending habits to see where your money is going. Your credit card statement will make this process fairly easy.

Maybe the amount you’re spending has increased in certain categories, like travel or grocery stores. If so, it might be time to look for a different card that can increase your cash back or travel rewards. Or perhaps you have some big expenses coming up early next year that could be put on a new card to earn a lucrative bonus.

Identifying your habits and shifting your spending to the right credit card could pay dividends in the new year.

Craig Joseph writes for NerdWallet. Email:

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CPI Report: Inflation Was Slightly Less Terrible in November

Goods and services are getting less expensive in response to the Federal Reserve’s persistent increases in interest rates. But prices are still higher than they were a year ago.

Consumer prices are up 7.1% year-over-year as of November 2022, according to Tuesday’s Consumer Price Index report from the Bureau of Labor Statistics. The Consumer Price Index tracks the impact of inflation through the change in average prices that consumers pay for goods and services, such as groceries and gas. Tuesday’s report showed the smallest year-over-year increase in the index for any previous month since December 2021.

Month-to-month, consumer prices rose 0.1% from October to November, a lower increase compared with the 0.4% change from September to October, BLS data show.

The shelter index, which has risen 0.6% since October, was the most significant contributor to overall price increases. Food prices are up, too. Both groceries and restaurant food increased by 0.5% month-over-month. Food, overall, is up 10.6% compared with the previous year, not seasonally adjusted.

But there’s good news, too: Energy prices are going down (-1.6%) compared with the previous month when energy costs rose (+1.8%). Those decreases in energy include gasoline (-2.0%), electricity (-0.2%) and utility gas services (-3.5%).

Here’s what changed:

Note: All month-to-month changes are seasonally adjusted, but year-over-year changes are unadjusted, per the CPI report.


September to October: +0.6%.

October to November: +0.5%.

November 2021 to November 2022: +10.6%.


September to October: +0.8%.

October to November: +0.6%.

November 2021 to November 2022: +7.1%.

Energy (fuel, utilities):

September to October: +1.8%.

October to November: -1.6%.

November 2021 to November 2022: +13.1%.

Medical care services:

September to October: -0.6%.

October to November: -0.7%.

November 2021 to November 2022: +4.4%.

Transportation services (insurance, airfare, etc.):

September to October: +0.8%.

October to November: -0.1%.

November 2021 to November 2022: +14.2.

New vehicles:

September to October: +0.4%.

October to November: No change.

November 2021 to November 2022: +7.2%.

Used cars and trucks:

September to October: -2.4%.

October to November: -2.9%.

November 2021 to November 2022: -3.3%.


September to October: -0.7%.

October to November: +0.2%.

November 2021 to November 2022: +3.6%.


The Federal Reserve Board, working on taming inflation, is meeting this week and is expected to announce another interest rate hike on Wednesday for seven increases in 2022. However, the upcoming rate increase is largely expected to be lower than the four prior 0.75 percentage point increases.

Anna Helhoski writes for NerdWallet.

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6 Steps to Higher Net Worth: A Year-End Financial Checklist

If you want to build momentum for your New Year’s money resolutions, set some financial improvements into motion before the end of the year.

Here are six easy-to-implement steps to help boost your net worth going into the new year.

1. Mind your health insurance deductibles

End-of-the-year financial planning strategies aren’t always this well-timed: “My son’s birthday is December 29th. His due date was actually January 2nd,” says Stacia Williams. “I begged my OB/GYN to go ahead and induce me.”

She knew her due date was close enough that the doctor could be flexible. And she also knew her insurance deductible would reset on Jan. 1, meaning she’d have to pay out of pocket as she began meeting the new year’s deductible.

“That saved us a ton of money,” Williams says. “He was my least expensive child!”

Williams is a founder of and a wealth advisor with the Williams Financial Group in Kansas City, Missouri, so she knows about such things. Suppose you’ve met your annual deductible or are close. In that case, you might want to schedule expensive medical procedures before the beginning of the new year, when your deductible resets and your out-of-pocket expenses could be much higher.

2. Use or lose your FSA balance

Being smart about your money often begins with employer-sponsored retirement, insurance and health benefit programs, says Marc Scudillo, a CPA and certified financial planner with EisnerAmper Wealth Management in Iselin, New Jersey.

He says many early-career workers have high-deductible health insurance plans combined with some type of tax-advantaged health savings account, such as a flexible spending account.

Many of these employer-sponsored health savings accounts are “use it or lose it,” Scudillo says. If there’s a balance still in the account by year-end, you may forfeit it. Some accounts have grace periods of a couple of months or so, and some allow you to roll over at least a portion, if not all, of the balance into the new year.

Either way, you’ll want to review that balance and your options before you end up having neither.

3. Plan holiday spending

Williams says budgeting for holiday expenses is a must so that you are confident you’re spending disposable income and not dipping into money needed to cover the necessities. That can be as sophisticated or simple as you’re comfortable with — from a spreadsheet to an app that helps track your spending.

She is also a fan of cash-back rewards and interest-free credit card promotions to help pay for holiday expenses (“it’s almost like layaway”). Just be sure to calculate the payment that will be due so that you’re confident you can pay off the balance before the interest-free period ends. And keep an eye on your credit limits; having more than 30% of a card’s limit in use can start to hurt your credit score. But your score will rebound as you pay down the balance.

Williams recommends holiday savings accounts when planning for next year. Some financial institutions offer incentives to open such accounts.

“That way, next year, your holiday budget is pretty much already set, and you can add to or take away from that,” she says. While these savings accounts don’t pay much in interest, it’s simply an automatic way to fund your holiday spending ahead of time.

4. Prepare now for tax time

“I always make my CPA earn her keep,” Williams says. She does that by having her tax advisor send her a list of receipts and documents to gather that will be needed for her particular tax situation.

She also suggests using an app to scan and organize receipts rather than stuffing them into an envelope or a box. It makes the gathering process “manageable and easy.”

Gig economy earners should also be aware of tax breaks and write-offs that they qualify for, Scudillo says — and have the receipts to back them up.

5. Monitor your credit

Monitoring your credit history and score is especially important this time of the year when fraud often seems to be on the uptick.

“You can be proactive by downloading a free credit tracking app,” Williams says. She says any errors or discrepancies should be reported to the credit bureaus.

6. Keep your life-after-work goals in mind

Check retirement plan limits and see if you can kick your contributions up a notch or two.

“One year-end review that we often see with younger professionals is that they get a bump in their compensation over the course of the year — but did they also bump up their savings?” Scudillo asks.

He suggests seeing if your employer offers an automatic annual deferral increase to its 401(k). Often called an automatic escalation feature, this lets you increase your employee contribution by a set amount each year, for example, 1% annually.

“We highly recommend that because it takes away that human inertia that people fall into,” Scudillo says. We often “delay, procrastinate or forget” to increase savings as our earnings grow.

“I think a lot of times we don’t ask enough questions,” Williams says. She says people barely like looking at their retirement account statements, let alone calling and asking questions about how to invest. If your employer offers a 401(k) plan, the investment company that sponsors the plan can be an excellent — and free — source of advice.

Scudillo has one final tip: If you don’t have financial goals, set them.

“If we had a certain targeted amount that we wanted to save over the course of the year, review: Did we get there? And if not, why not?”