In the event that you overdraw your account, when you withdrew funds from an ATM, write a check, use your debit card to make a purchase, or make an automatic bill payment or
other electronic payment for more than the money in your checking account. The choice to either pay the amount or not is left up to the bank. Even though you do not have the money in your account,
you may be charged a fee for the overdraft. If your check gets returned by the bank without paying it, you may be charged a non sufficient funds or bounced-check fee. The company or person that you
had written the check to may charge you a returned check fee, in addition to the fee that your bank charges.
The way to best avoid a bounced check fee or overdraft fee is to manage your account so you can avoid overdrawing it. To accomplish this, you will want to keep track of how much money you have in your checking account by accurately keeping your account register up to date. Make of record of all written checks and other transactions when you make them, and do not forget to subtract any fees. Pay attention closely to your electronic transactions. Make a record of all your withdrawals from ATM's and fees, online payments, and debit card purchases. Do not forget about automatic bill payments you may have set up for insurance, utilities or loan payments. Make sure you keep a eye on the balance in your account and remember that some automatic payments and checks may not have cleared yet. Every month, review your account statements. Between statements, you can figure out your balance and which payments have cleared by checking online, calling your bank, or at an ATM.
Many banks offer bounce coverage plans or overdraft protection as a courtesy so that your checks do not bounce and your debit card and ATM transactions go through. With these plans, you will still pay a bounce coverage fee or overdraft fee for each item to the bank. However, you will avoid the merchant's returned-check fee and will stay in good standing with the people you do business with.
Credit Unions, savings and loans, and banks may offer alternative ways of covering overdrafts. If you have other accounts at the bank, such as a savings account, you may be able to link that account to your checking account. If you overdraw your checking account, the bank or credit union can transfer funds from your savings account to your checking account. You can also set up an overdraft line of credit with the bank. Just as you would apply for a regular loan, you would need to apply for a line of credit. The bank would then lend you the funds by using your line of credit to cover a overdraft. There might be an annual fee and you will have to pay interest on this loan, but the overall costs may be less than the costs for courtesy overdraft protection plans. Another option is to link your credit card you have with the bank to your checking account. If you link your credit card to your checking account, any overdraft amount becomes a cash advance on your credit card. You will probably be charged interest and a cash-advance fee using this method. The cost of this option depends on how long you take to pay back the advance and the interest rate on your credit card.
Sometimes mistakes can happen. If you do happen to overdraw your account, deposit the necessary funds into the account as soon as possible to cover the overdraft amount plus any fees and daily charges from your bank. Depositing money into your account can help you avoid additional fees and overdrafts.