Home Members Tools Credit Cards
   

  • Banks Offer Protection From Overdrafts, Not From Fees

    When your bank receives a transaction that exceeds your checking account balance, the bank will do one of two things. They can either process the transaction or they can return the transaction to the merchant. Many people would like the bank to go ahead and process the transaction and banks will give you this courtesy, if youíve opted-in to having overdraft transactions processed.

    However, youíll pay a fee if the bank pays a transaction when you donít have enough money in your account to pay for it yourself. In a sense, youíre borrowing money from the bank. This ďcourtesyĒ of processing overdraft transactions helps you avoid bounced checks and declined debit card transactions. In return for the courtesy, the bank charges you an overdraft fee and the fees arenít exactly cheap. According to TIME, the median overdraft fee was $29 in 2011. Market Watch predicts fees could go as high as $40 to $45 this year. That could be a steep price to pay, especially if the overdraft is only a few dollars.

    No Overdraft Without Permission

    Even though the Federal Reserve passed a law giving consumers the option to disallow overdraft transactions and thus overdraft fees, we still paid almost $30 billion in overdraft charges in 2011. If consumers have the ability to tell banks not to process transactions that would cause overdraft fees, why are we still paying so much?

    Consumers may have agreed to overdraft fees out of fear having their debit cards be declined Ė which is what would happen if they opted-out of overdraft protection. For some consumers, an overdraft fee is better than multiple non-sufficient funds fees from the bank and a returned check fee from the merchant, which is what happens when overdraft protection is turned off. For some customers, that type of penalty may be the thing that forces them to keep their checking account balance in check.

    Some banks offer an additional service that would allow you to avoid the overdraft fee. This overdraft protection pays overdraft transactions from your savings account or charges them to a line or credit. However, banks even have a fee for this service. The fee is cheaper, often $10 or $15, but it is still more than youíd pay if you never overdraft at all.

    You Canít Cheat Overdrafts

    Donít skirt too close to your balance thinking you can float transactions or minimize your overdrafts by making purchases in a certain order. Unfortunately, you have no control over the order in which your transactions are processed.

    In recent years, banks have come under fire for processing transactions in a way that would causes more overdraft fees, which isnít necessarily in the order you made the transactions. You might make several small purchases and then one big purchase thinking only that big-ticket item would overdraft, but youíd probably be wrong. With a stack of transactions in front of them, many banks will process the biggest item first and then all those smaller items would overdraft leading to several overdraft fees instead of the one that youíd planned for.

    The best way to avoid fees from overdrafts and bounced checks is to spend only as much money as you have in your checking account, nothing more. Itís a good practice to have a buffer of $500 to $1,000 in your checking account. The buffer acts as a safety net to catch transactions that might have otherwise caused you to overdraft. Never let your account balance dip below your buffer and youíll never overdraft.

    Be responsible with your finances. That means checking your account balance frequently and keeping up with your transactions. It means never swiping your debit card or writing a check you know you canít cover today or that you wouldnít be able to cover after pending transactions have cleared. Yes, that may mean sacrificing something right now, but it also frees you from overdraft fees.

    Many banks will forgive an isolated overdraft fee. If you accidentally overdraft, call your bank and explain. Let them know it was a mistake and ask that they waive the fee. Fee forgiveness isnít an option for habitual overdrafters. Youíll have to fork over the fees and get more disciplined about your spending if you want to avoid future overdrafts.

    Sources: Moneyland.Time.com, Market Watch
  • Disclaimer

    Information in these articles is brought to you by Finance Globe. Banks, issuers, credit card, and other companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles and is further subject to our terms and conditions.
  • Recent Activity

    Nuovocapitolo

    Bank of America Upgrade

    Thread Starter: Nuovocapitolo

    It had been a year since I surprisingly got a Bank of America Basic Credit card with a locked in rate of 17%, so I thought I would call and see if...

    Last Post By: SAR1954 April 24th, 2014, 10:40 AM Go to last post
  • Recent Forum Posts

    SAR1954

    Re: Bank of America Upgrade

    Was just approved the Bank of America Better Balance Rewards CC, CL $1500. Dont know all the details just yet, will update this post when I do. I believe

    SAR1954 April 24th, 2014, 10:40 AM Go to last post
    aafe1990

    Re: Capital One Cards & Credit Questions

    Thank you so much. That's what I'll try to do. I say try because at the moment I'm stuck in a place where my paycheck pays off one of my cards in full

    aafe1990 April 23rd, 2014, 10:17 AM Go to last post
    SAR1954

    Re: Capital One Cards & Credit Questions

    My opinion based on personal experience and if I am reading correctly you currently have two capital one credit cards that are both under a year old,

    SAR1954 April 23rd, 2014, 10:05 AM Go to last post
    aafe1990

    Capital One Cards & Credit Questions

    Yes hello everyone. I'm new here and just needed some help in regards to my capital one credit cards and questions. Okay so first off my very first

    aafe1990 April 19th, 2014, 07:05 PM Go to last post
    bocald99

    Re: Report Your "Credit limit Increases" Here!

    La-Z-Boy Comfort Studio Card CLI from $1500 to $3500.

    bocald99 April 18th, 2014, 11:04 PM Go to last post
  • Recent Headlines and Articles

    ChrisB

    5 Tips for Saving on Office Supplies

    In todayís economy, saving money at your place of business is more important than ever before. Regardless of company size or industry, there are many ways to save.

    Here are five tips to consider when purchasing office... read more
    ChrisB April 24th, 2014, 07:55 AM
    ChrisB

    Is your Local Bank the Right One for you?

    Choosing a local bank is a big decision. While some people stick with the institution they have relied on for many years, others are open to making a change if it makes sense to do so.

    Do you have the feeling that your current... read more
    ChrisB April 23rd, 2014, 08:07 AM
    akfilipp

    Go Green to Save Green

    Itís Earth Day. Well, on the day this article gets published it will be officially, but no matter what day of the year it is as you read this its message will have relevance. What was once a single day annual event that appealed mainly to tree hugging... read more
    akfilipp April 22nd, 2014, 07:08 PM
    ChrisB

    Answer these Financial Questions before Choosing a College

    Are you in the process of comparing colleges? Are you hoping to make a decision on which one to attend in the near future? Despite the fact that this is one of the biggest decisions of your life, you only... read more
    ChrisB April 22nd, 2014, 08:26 AM
    ChrisB

    Do these Three Things before Filing for Bankruptcy

    Are you interested in filing for bankruptcy? If so, you should understand the seriousness of making this decision. It may be something that could benefit you now and over the long run, but at the same time... read more
    ChrisB April 21st, 2014, 07:59 AM
    ChrisB

    Hiring a Painter? Use these Tips to Save Money

    When hiring a painter, either for an interior or exterior project, it is essential to find a high quality professional that can give you the results you are looking for. At the same time, you should do whatever it takes... read more
    ChrisB April 18th, 2014, 08:07 AM
    ChrisB

    Quick Tips for Choosing the Right Financial Planner

    If you are serious about your financial situation and hope to make all the best decisions for your future, it may be time to hire a professional. But not just any professional. You need to find a local financial... read more
    ChrisB April 16th, 2014, 08:35 AM
    Mary Tomkins

    Today's the Deadline to File Your Tax Return

    If you haven't already done so, today's the day to file your return and pay your 2013 taxes. If you need more time to complete your return, you can submit IRS Form 4868 to request a six-month extension.... read more
    Mary Tomkins April 15th, 2014, 01:16 PM

 

 

 

Credit Cards | Finance Social Network | Credit Card Reviews | Markets
About Us | FG on the Web | Sitemap | Privacy | Terms | Contact


Copyright © 2014 Finance Globe. All rights reserved.