Getting rid of overdraft and bounced check fees is a really important step if you happen to be one of the people who is at odds with this problem. Not only is this a very expensive problem, it should be regarded as a red flag for the very serious threat to your financial future because it denotes a poor grasp of basic money management.
What's an overdraft? An overdraft is simply the negative balance that shows up on your account balance after you're made one or several transactions and their total is superior than the amount of money that you had on your account. Check writing, ATM withdrawals, online bill payments, any transaction that reduces the money in your account can get you overdrawn.
At this point, your bank has two options. It either pays the amount of the transaction or it doesn't. If it chooses to pay in spite of you not having the money available, you will be charged an overdraft fee. If it chooses not to pay and returns the check, you will be charged a bounced check fee.
The best way to minimize such fees is to manage your bank account so that you're not in a situation where you overdraw it. There are many ways you can keep close track of your account balance. Record all your transactions when you make them, without forgetting that any banking fee you usually pay has to be accounted for.
Pay special attention to your electronic transactions. Record your ATM withdrawals and fees, debit card purchases, and online payments. Don't forget about online bill payments you may have set up for utilities, insurance, or loan payments. Keep an eye on your account balance. Remember that some checks and automatic payments may not have cleared yet.
Make it a monthly habit to check balance your accounts. In the time between getting account statements, you have several options for checking the rate at which your transactions are clearing: by phone with your bank, online, or at an ATM that doesn't charge you a fee for checking your balance.
If, unfortunately, you find yourself having overdrawn your account, you best bet would be to deposit some money back into it as soon as you have cash available. Remember that you will also have to account for your bank's overdraft fees. Some banks will take the opportunity to sell you on alternative ways to cover overdrafts.
Most likely you will get to choose one of those options. You can either link a savings account of yours (at the bank) to your checking account, or apply for an overdraft limit of credit with the bank. In the first case, every time there is a transaction that would result in your checking account being overdrawn, funds are automatically transferred from your savings account to prevent that. In the case of the line of credit (which you will have to apply for and will be treated as a loan application when it comes to eligibility), your account will be allowed to operate with a negative balance, up to your credit limit. That balance will generate interest, and the credit line itself may be subject to an annual maintenance fee.
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