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Friday, February 6, 2009

How To Get Rid Of Overdraft And Bounced Check Fees

By Merril Bernstein

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? When your bank has to pay for a transaction that you make for more than your available account balance, the resulting negative balance is an overdraft. Whether you write a check, withdraw money from an ATM, use your debit card to make a purchase or make an online bill payment, if it's for more money than you have, it's an overdraft.

When the transaction shows up, your bank has the choice of either paying for it or not. If it elects to honor the transaction regardless of the fact that you don't have enough money to pay for it, it will charge you an overdraft fee. If, on the other hand, it decides that the check will not be paid and returns it for non-sufficient funds, it will then hit you with a bounced check fee.

You can certainly eliminate such fees if you do what you need to do to manage your bank account properly. That means doing your best so that your account does end up with a negative balance by keeping track of how much money you have available at all times. It's suggested that you register your transactions as they happen. You should also keep tabs on any bank fees so that you record them too.

You will have to be especially vigilant about electronic transactions. Your ATM withdrawals (including any fees), purchases paid for with your debit card, as well as online payments can easily be forgotten and must be recorded ASAP. In the same vein, regularly scheduled online bill payments for utilities, insurance, or loan payments should not be forgotten. Know your account balance and remember that some transactions may take a while to clear if you see it's higher than what it should be.

Review your account statements each and every month. Between statements, finding out which payments have cleared is as simple as calling your bank to get your current balance, checking it online, or getting it from an ATM (assuming that you won't get charged just for checking).

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 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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