For many people opening and maintaining a checking account in good standing is the first step to building one’s credit history.
Even with the best of intentions when managing your finances, there may be rare occasions where the funds on deposit run a bit short of the payments being made. In those circumstances, it is best to have some overdraft protection on your checking account so the bills still get paid on time and in full.
How Do You Overdraft?
Overdraft occurs when the amount of the withdrawal exceeds the amount of deposit in the account. Overdraft protection is a line of credit that consumers can link to their checking account to help cover the excessive withdrawal amount. There are a variety of ways a line of credit can be linked to provide overdraft protection.
How to Protect Yourself from Overdraft Fees
Some banks will provide their depositors the option to pay an additional fee for overdraft protection on their checking accounts. The fees for this service depend on the bank you use, the other types of accounts you have with the bank, and the type of checking account you have opened. When the overdraft protection kicks in there may be interest charges or even an additional non-sufficient funds fee. You need to check with your bank in advance to see what fees may apply in your case.
Another option for getting an overdraft line of protection is by connecting a viable credit card to your checking account.
When you overdraft on your checking account, the difference will be covered by your credit card. Additional fees that may apply in that scenario are cash advance fees for your credit card. Your bank would be the one that could set up the ability for your credit card to be used as your line of overdraft protection. However, not all banks allow this option so you will need to speak with them directly.
Whatever way you choose to set up a line of overdraft protection will be a smart move. Even those with the best of intentions and a calculator by their side, can make simple math errors. Why risk it, protect yourself with overdraft protection on your checking account.
