It’s easy to get caught in a cycle of overspending with a credit card. If you’re not careful, you may end up with an unpaid balance and hefty interest charges. To avoid this situation, follow these tips for how to avoid going into overdraft on your 3% cash back credit card:
Be sure that the transaction was declined
To avoid overdraft fees, it’s important to be sure that your bank declined a transaction. The following are the most common reasons for a declined transaction:
- Amount of the transaction was too large for your account balance.
- Transaction date was after your check or savings account statement closing date.
- Merchant name did not match any of your previous transactions with that merchant in the past 12 months.
- Location of the transaction did not match any of your previous transactions with the same merchant in the past 12 months.
Know your credit card terms and fees
Your credit card terms may include a fee for making a payment after the due date; if you don’t pay off your balance in full each month, it can be costly to use your card. In addition, some cards have a “merchant service charge” or monthly fee that’s assessed against every purchase made using their card.
For example, 3% Cash back credit card offer incentives to use it, such as rebates on purchases and cash-back bonuses when you spend more than $1,000 per year with the same issuer. Other rewards include gift cards or discounts on travel-related expenses like airfare and hotels.
Check your balance at least weekly
The easiest way to manage your finances is to check your balance at least once a week. This will ensure that you don’t get hit with any surprise fees in the form of overdraft charges, which can add up quickly.
You should use online banking or mobile banking to review your transaction history, as well as see if there have been any purchases made on your credit card without your knowledge or permission. Checking these things can help you avoid being charged for something that wasn’t authorized by yourself or another person with access to the account.
Go paperless if possible
If you have the option of going paperless, then do it. The only reason not to is if you have some sort of physical disability that prevents it. When you go paperless, there are a few things that happen:
- You don’t get a bill every month—instead, your bank sends out an email or text message detailing how much money was spent on what services.
- Your bank automatically puts any purchases over your balance into the next month’s total instead of charging interest for late payments (or worse). SoFi professionals say, “You can set up auto-pay right away, but if you want to make a one-time payment, you can do so anytime.”
- It’s easier for your bank to send out alerts about the suspicious activity so that you can contact them immediately.
Be sure to check your balance regularly and never use your credit card to pay for things that you can’t afford. A good rule of thumb is to always keep at least $1,000 in your checking account. You can also set up alerts that will warn you when your balance goes below the amount you specify so that you won’t be surprised by overdraft fees.