It happens to the best of us, sometimes we misjudge the amount of money in our checking accounts and find ourselves overdrawn. If you have outstanding checks or automatic payments coming through on an overdrawn account, if you are not careful, you may find yourself hit with overdraft fees.
Worse, if the bank chooses not to pay out the check, your checks could bounce and you could also be charged a returned check fee from the company or person to whom you wrote the check. These fees can add up quickly and put you even further in the hole than you were with a zero balance.
How Do You Protect Yourself?
To protect yourself from this circumstance, many banks offer what's called "overdraft protection." It's a good thing to take advantage of, and be aware of. To avoid overdraft fees, see if your bank will let you do one of the following:
You can link your checking account to a savings account, if you have a savings account with the same bank. If you overdraw your checking account, the bank automatically transfers money from your savings account to cover the shortfall.
You might be able to set up an overdraft line of credit. To do this, you would need to apply for a "line of credit," the same way you would apply for a loan. If you qualify, the bank will extend a line of credit to you as overdraft protection, which you would pay back when you have funds in your account again. If you are interested in opening a line of credit, it's a good idea to do so before you start bouncing checks.
You could also try to link your account to a credit card, if you have one with the bank. Be careful, though, because any overdraft amount will be charged as a cash advance and subject to whatever interest rate your credit card charges.
