Dave Ramsey Says Overdraft Protection Really Doesn’t Protect You. Here’s Why He’s Right

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Don’t count on overdraft protection without reading Ramsey’s advice.

Key Point

• Overdraft occurs when you try to withdraw more money from your bank account than you have.
• Overdraft protection aims to avoid paying high fees.
• Dave Ramsey doesn’t believe overdraft protection will actually protect you, and it’s better to change your spending habits to prevent overdraft.

If you try to withdraw more money from your bank account than you can afford based on your current balance, your bank may allow it. Overdraft fees are likely to occur and can be very high.

Finance guru Dave Ramsey warned about these fees, Ramsay Solutions A blog that says banks made over $11 billion in 2019 alone. Clearly, this is a major cause of concern for many. Because paying the bank a hefty fee when you’re already short on funds is the last thing you’ll ever need.

many banks conduct offers a service called overdraft protection, but Dave Ramsey warns that it’s often not the only thing they’re cracking down on. Here’s why financial experts don’t believe overdraft protection is actually protective.

This is Dave Ramsey’s issue on overdraft protection

According to Dave Ramsey, overdraft protection “doesn’t really protect you” for a simple reason. This type of protection usually involves transferring funds from another linked account, such as a savings account, to make up for the shortfall when too much money has been withdrawn from the bank. And Ramsay believes that’s a bad thing.

“The more money you withdraw from your savings, the more likely you are to start piling up minimum balance fees,” Ramsey warned. less.”

Overdraft protection may also come with ongoing fees for the service, so you’ll pay your bank even if you don’t need the protection. They limit the number of overdraft transactions and even revoke protection and close accounts entirely if overdraft occurs frequently.

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

Instead of signing up for overdraft protection, Ramsey suggests changing your spending habits to avoid being hit by these fees.

“The only way to truly avoid overdraft is to control your spending. The truth is, kids do what they feel good about. Adults make plans and follow them,” he advises. did.

The reality is that Ramsey suggests that overdraft fees are one of the main reasons some people are hit with overdraft fees right now, not because they are wasting their money. In some cases, you may overdraw your bank account for basic necessities. And Ramsay admits that it can happen. It’s stressful to match and bank charges don’t help.” Ramsay Solutions read blogs.

But even for those who tend to be short on money, Ramsey believes his solution of limiting spending will work. “You can still manage your money and create a budget that works for you, so you never have to pay overdraft fees again,” he said.

Following this advice to budget and live within your income is definitely wise to avoid overdrafts and improve your overall financial life. However, if you still feel that mistakes can be made, we recommend opening an account with a bank that does not charge any overdraft fees at all. That way, if something goes wrong, you won’t end up with extra charges that only make things worse.