Over draft protection is costly but it is less costly than bounced checks; not only money is lost when this happens but your reputation as a trustworthy is at risk. Tell me more, you say, about overdraft protection; What is it, how does it work, and how can it be use wisely?
Overdraft protection is a bank’s way of protecting you from the indignities of bounced checks. Let’s say you went overboard at Christmas time and overspent. It was nothing you meant to do since you are careful with your money and you keep track of how much you have left over to spend until the next bank deposit. But just once you slipped up. This past Christmas you thought was an exception, but it proved otherwiselIt is December 24th and you have only fifty dollars to last until the first of next month. No problem, your food shelves are filled, your gas tank is full, and you will be ultra conservative. You plan on spending nothing until after the first of the year. The unexpected happened: You had an expense that you had not counted on. No problem you thought, having suddenly remembered you have overdraft protection at the bank.
What you did not know until you got the letter from the bank telling you of their loan to cover for you, how expensive this bank courtesy was. Had you read the fine print in the agreement before you signed on for this you might have opted for other ways around bounced check dilemmas. Your bank is one of these banks that have more angles on how to entice you into their clutches than you once though possible. Yet you have no problem with them and have happily, until now, allowed them to take care of your money with most of the transactions in your favor.
The tide has turned. You know better know and will, in the future, become an even better manager or your money than you are now. Had you been aware of the extremely high fee for overdraft protection you would have charged this new unexpected expense on your credit card and would have paid it off within a month or two, and it would have only cost you a small interest payment.
Wanting to learn more you search out an on-line site that fills in the blanks for you about the good and the bad about overdraft protection. The first thing you learned is that it is not as soft a cushion against bounced checks as you had assumed. In your former life, that is before signing up with you bank for this courtesy against bounced checks, you would never have allowed your bank account to get so low.
You would have bought Christmas gifts within your means and there would not have been a problem. You would have had enough money that would have covered the unexpected expense. In the future you will be wiser. You have now learned more about overdraft protection and how it will work well for you if you understand it in its various forms:
Speak to your bank about other options on how to use overdraft protection to your advantage. You can have them take money out of a savings account to cover your overdraft; borrow up to your line of credit; have them deposit the amount into a credit card, or go for the high courtesy draft protection.
Courtesy draft protection is expensive, but your bank will help you find other, less expensive means. All, however, have fees attached to them. The best and the only way to avoid the expense of any of these is to become a better money manager. You do this by watching your account closely.