How to Beat Bank Fees

On July 1, new federal rules will require banks to ask customers to opt in for overdraft coverage—a line of credit that kicks in when account holders make purchases that exceed their available checking and debit account balances.

To lure customers to their programs, some banks are trimming their overdraft fees. Under the new law, if account holders don't opt in, banks won't be able to cover their charges when their account balances fall short. The charge simply will be declined, and the customer won't be charged an overdraft fee.

Still, the banking industry says some demand for the service will persist. "People want their important bills paid," says Nessa Feddis, a vice president and senior federal counsel for the American Bankers Association.

For those who want to retain their overdraft protection, but not the big price tag, here are five tips for cutting your overdraft charges:
1. Don't opt in.

Even though some banks recently announced plans to trim their overdraft fees, paying to automatically cover an account overage remains costly. For instance, U.S. Bancorp recently announced that any purchase of $20 or less on an account that's overdrawn will be charged $10, up to three per day; if the expenditure tops $20, the charge is $33. As long as overages put an account more than $10 overdrawn, cardholders who overdraft three times in one day will still be hit with a $30 fee that could have been avoided.

Some banks even charge a fee each day an account sits in arrears. Bank of America charges its customers $35 if it determines that an account has been overdrawn for five or more consecutive business days.
2. Carry backup cards.

Consumers should keep backup cards in their wallet and a little cash just in case, says Odysseas Papadimitriou, the CEO of Evolution Finance, which publishes CardHub.com, a credit-card comparison website. "Keeping an extra one or two credit cards on hand can help prevent running out of payment options if some sort of fraud-related hold strikes your account," he says.
3. Balance your checkbook.

Keep an eye on your account balances; check weekly, or even daily if you're operating on the edge. Be vigilant about withdrawing funds from retail stores that offer cash back on debit-card transactions. Although banks will generally alert customers if they're about to go over their limit at ATMs, in-store debit withdrawals typically won't trigger any overage notification, says Mr. Papadimitriou.
4. Get payment alerts.

Most card issuers, including J.P. Morgan Chase, American Express and Bank of America, have long offered to alert their customers when account overages occur or when payment due dates are imminent. "We're trying to help...reduce overdraft fees," says a Bank of America spokesman. "We don't want them to buy a $40 cup of coffee."
5. Consider some options.

Consumers might also consider linking their checking account to either a savings account or a credit card, says Bill Hardekopf, the chief executive of LowCards.com, a credit-card comparison site. There is usually a $5 to $10 fee for dipping into another account, but for customers who pay off their credit-card balance each month, this can be a good option, he says.