What To Do When Overdrafting Your Checking Account

by Charles on March 3, 2013 · 5 comments

in credit, Debt

My coworker last week was telling me a story where he overdrafted in his checking account the day before. His bank had already charged him $30 for the initial overdraft and would charge him an additional $30 for each day the account is overdrafted. The reason he overdrafted from his checking account was he accidentally used the wrong account to pay for one of his credit card bills. This account so happens that it wasn’t his primary checking account and that a simple misclick of the mouse lead him to this very stressful situation. Fortunately, after a few phone calls and a week later, his bank was gracious enough to cancel all of  the fees.

But not all banks are this generous. My coworker could have been out more than $100 in overdraft fees that was only a couple hundred dollars over his balance. If it were any other situation and if he did not have any additional money to pay back the overdraft, the $30 fee would have accumulated everyday to an astounding number. There are a few solutions to this type of problem to minimize the fees.

1. Credit Card Cash Advance or Payday Loans – Cash advance and payday loan fees are no joke. But they’re quick and you can have money in your  hands in a matter of driving up to an ATM and taking cash out with your credit card. Most cash before payday loans guarantee money in your hands within 24 hours if not within the hour of loan approval. Although the interest rates on these methods are astronomical, it can minimize your bank fees if taken care of quickly.

2. Line of Credit – You can apply for a line of credit against your checking account. When you overdraft, instead of eating up overdraft fees, you would automatically take a line of credit loan for the amount overdrafted. The interest rates are much more manageable and even if it takes an entire week to take care of the balance, the total fees would be much less than a typical bank overdraft fees.

3. Online Savings Account – Every month, put aside a few dollars into an online savings account that is directly linked to your checking account. Consider this as an emergency fund where you use it for emergency purposes. When money is needed right away, this account will be available at all times.

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Mark Miller March 17, 2013 at 11:03 AM

The line of credit sounds like the best solution since the interest rates are more manageable. What are the chances of getting a line of credit? Are the requirements for acceptance stringent? It probably depends on your credit rating as well as your relationship with the financial institution. I wonder if having this might be a temptation to overspend for some people. Financial responsibility is the key to avoiding this problem, although a wrong click of the mouse can wreak havok if you are unaware as the fees add up. Thanks for a useful post!
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Will Van Hartog March 25, 2013 at 5:58 AM

I’m not a big fan of payday loans myself but can see the benefits that it migght have to those who take one out!

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Nicolas Nigg April 16, 2013 at 4:13 AM

wow, good story, It only show how ease is sometimes not good
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