Manage Stress With Overdraft Protection

When Mistakes Happen

We all make mistakes from time to time. If you have a bank account then you may have overdrawn your balance at some point and incurred a bank fee. Wouldn't it have been nice to have some sort of protection in place to cover the amount of your overdraft and avoid the extra fees and embarrassment? Overdraft protection is a bank service that covers your checks and debits when your account balance is insufficient.

How Overdraft Protection Works

The shortfall in your account can be covered with a transfer from your savings account, line of credit, or credit card. If you're able to add money to your account in a reasonable time, any resulting charges will likely be less than the bank overdraft fee and any returned check fee charged by the recipient of the check.

How Can I Sign Up?

You can get overdraft protection by signing up for it at your bank. While there is no fee to set up the protection, fees may apply for every transfer. Interest will be charged if you use your credit card or credit line. Your bank may impose limits on how much it will cover and it may revoke protection if you use it too often.

It's All Upside

Overdraft protection can save you a lot of money because charges for bounced checks tend to range from $25 to $35 each. In fact, the fees associated with an overdraft can themselves cause further overdrafts if you don't catch them and make a deposit soon enough.

Avoid Overdrafts

One way to lower your fees is to avoid overdrafts in the first place. You can monitor your bank account any time, from any computer with internet access using another service provided by your bank known as online banking. By tracking your balances you can time your payments and even transfer money between accounts to make sure that all your payments are covered. Even ATM withdrawals and debit card payments can trigger overdrafts. New rules known as Reg E will go into effect in July, 2010 that allow you to opt in for overdraft coverage on your debit card transactions.