Dave Ramsay says overdraft protection doesn’t really protect you.Here’s why he’s right

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Don’t expect overdraft protection without reading Ramsay’s advice.


key point

  • An overdraft occurs when you try to withdraw more money from your bank account than you actually have.
  • Overdraft protection is designed to save you from paying expensive fees.
  • Dave Ramsay doesn’t believe that overdraft protection actually protects you, it’s better to change your spending habits to prevent overdrafts.

If you try to withdraw more money from your bank account than your current balance can handle, your bank may allow you to do so. But this comes at a price. You may be hit with overdraft fees, which can be very expensive.

Finance guru Dave Ramsay warns about these fees Ramsay Solutions The blog shows that banks made more than $11 billion through them in 2019 alone. Obviously, this is the main reason why many people worry, because paying a large fee to the bank when you already don’t have enough money is the last thing you need.

many banks Do Offers a service called overdraft protection, but Dave Ramsey warns that’s often not all that people think. That’s why financial experts don’t believe that overdraft protection is actually protective.

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Here’s Dave Ramsay’s Overdraft Protection Issue

According to Dave Ramsay, overdraft protection “doesn’t really protect you” for one simple reason. This type of protection usually ends up moving money from another linked account (such as a savings account) to make up for when too much money is withdrawn from your bank. Ramsay thinks this is a bad thing.

“The more you take out of your savings, the more likely you are to start charging minimum balance fees,” warns Ramsay. “If you have a financial emergency, the less money you have to spend.”

Overdraft protection can also come with ongoing fees for the service, so even if you end up not needing the protection, you’ll end up paying the bank. Banks may limit the number of overdraft transactions that are protected until fees come back, or even revoke your protection and close your account completely if you end up overdrawing too often.

What does Dave Ramsay recommend instead of relying on overdraft protection?

Ramsey recommends that you don’t sign up for overdraft protection, but simply change your spending habits to ensure you never get hit with these fees.

“The only way to really avoid overdrafts is to control your spending. Because the truth is, kids do what they feel good about. Adults come up with a plan and follow it,” he advises.

Now, the reality is that some people do get hit with overdraft fees, not because of their profligacy, which Ramsay believes is a big reason for them. In some cases, necessities do cause you to withdraw too much from your bank account. Ramsay acknowledged that could happen. “Now, we know that sometimes an overdraft happens when you’re trying to pay your bills. We get it. It’s stressful to make ends meet and bank charges don’t help,” he said. Ramsay Solutions Blog reading.

However, even for those who do tend to be short of money, Ramsay believes his solution of limiting spending will work. “You can still control your money and create a budget that works for you so you don’t have to pay overdraft fees,” he said.

It’s definitely wise to follow this advice to budget and live within your means, both to avoid overdrafts and to improve your overall financial health. However, if you think mistakes can still happen, it’s also a good idea to open an account with a bank that doesn’t charge overdraft fees at all. That way, if things do go wrong, you still don’t get hit with extra charges that will only make things worse for you in the end.

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