Check and see if you

have overdraft protection

Most of us have a checking account, and possibly, have bounced a check. A bounced check is where you have written a check or purchased an item and there is not enough money in the account to cover it. Usually the place you wrote a check to will charge you $25 to $35, plus your institution will also charge you a comparable fee. One check could cost you $50 to $70 and not even cover a single penny of the item you purchased. Instead of paying this fee, check with your institution to see if they offer overdraft protection loans and/or target sources of savings.

Overdraft protection is an unsecured line of credit that helps cover the checks when there is not enough money in the account. Interest rates on these types of loans can be high, but the interest you pay for a few days will be substantially less than $70. Let’s say you had to take a $500 advance on your overdraft loan account for seven days at 20% interest. You would pay roughly $.27 in interest per day or $1.92 for those seven days. That is a huge difference. Plus, you don’t pay interest unless you use the overdraft protection loan.

One other way to help avoid bouncing checks is to have a savings account listed as a target source in the event of insufficient funds. There is often a $2 to $10 charge per transaction to automatically move funds from a savings account to checking, but that is still much less expensive than the $70 in fees!

The best way to avoid insufficient fund charges is to not write checks until the funds are available, but we are all human and do make mistakes. Avoid the fees and embarrassment of a bounced check by having overdraft protection or a valid target source in place.