 Numerous
provisions may apply, depending on your banking arrangements and your
past credit history. You can link up a banking checking account to a
savings account, for instance, to self supply overdraft projection and
thus avoid the fees that typically coincide with overdrawing an account.
Alternatively,
you can apply for what are known as overdraft lines of credit,
basically, your banking center will allow you to borrow past the amount
of money in your account (up to a limit, of course). You pay for this
privilege both in terms of fees and interest rates, but the initiative
offers you a way to weather certain financial storms.
Your best
protection against having to use a default overdraft mechanism is to
budget effectively and conservatively. Store up a nest egg to handle
emergency expenses. This should typically be three to six months worth
of living expenses. In addition, have at the ready other forms of last
minute financing, credit cards, easy to liquidate investments, and
savings accounts, to avoid having to tap into your overdraft banking
protections and thus siphoning money to the bank for no reason.
In
addition to budgeting correctly, you need to pay attention to your
check book balance. Work with a banking associate or a financial
counselor to ensure an accurate lager of personal checking transactions.
Don't get caught off guard by big ticket purchases or tax season, for
instance.
In addition, if you have to write a spate of checks on
an already nearly overdrawn account, talk to your creditors to see
whether or not you can postpone or partially defer some bills. This way,
you can avoid the interest and finance charges that your banking center
will likely apply. Do some back of the envelope calculations before you
take action.
Calculate how much interest your credit card or
your creditor arrangements will cost you, and compare those fees to the
overdraft charges that your banking center will charge. Finally, be
aware that certain types of overdraft protection, such as ad-hoc
coverage, may be dispensed at the discretion of banking executives, so
don't count on them as you create your payment plan. |
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