Protect Yourself From Overdraft And Bounced Check Fees: Fill & Download for Free

In the U.S., “overdraft protection” refers to two distinct services:opt-in overdraft protectionWhen you “opt in” to overdraft protection, you are allowing the financial institution to charge you a fee (typically around $35) if they honor an overdraft for a point of sale (POS) or ATM transaction.Note that the overdraft is still discretionary on the part of the financial institution, meaning they may or may not honor the overdraft, but if they do, they can charge you a fee.If you do not “opt in”, they still may honor the overdraft for a POS or ATM transaction, but they may not charge you a fee. (To be clear, they typically won’t honor the overdraft, mainly because they want you to opt in, so that they can charge you the fee.)For other types of transactions (e.g. a check, or a recurring debit card transaction), the financial institution always has the option to honor the overdraft and charge a fee. If they decline the overdraft, they will typically charge you the same fee, but it will be an NSF (non-sufficient funds) fee.pre-arranged overdraft protectionPre-arranged overdraft protection (commonly, simply called “overdraft protection”) involves providing another source of funds to pay the overdraft. That source of funds might be another deposit account at the same financial institution or a line of credit that they have provided you with.The fees associated with pre-arranged overdraft protection (separate from any interest charges) are usually smaller than the fee when you do not have pre-arranged overdraft protection, and some financial institutions may even honor pre-arranged overdrafts without a fee.Summaryopt-in overdraft protection: you are subjecting yourself to large extra charges, but you get to spend money you don’t havepre-arranged overdraft protection: you are avoiding bounced checks and the charges imposed will generally be less than if you did not have pre-arranged overdraft protection

Banks don’t just allow you to overdraw your account. They approve you for the privilege by offering you a credit line, which is what overdraft protection really is. You don’t have to accept overdraft protection if you don’t want it.Individuals determine if this is a useful tool for their own finances. I have overdraft protection, but have never used it. I personally wouldn’t want my bank to simply decline my purchase, especially if it is something important, when overdraft protection is available for me. Nor would I want the bank to bounce one of my checks over something like a $10 overdraft. If you personally prefer that your bank does deny the purchase, then again, decline the credit line.These features existed from a time when many people were paid directly by check, which they then had to deposit themselves in the bank, during banking hours. The checks then had to clear. For many people, especially those who live paycheck to paycheck, that was a great hardship. Overdraft protection allowed them to buy what they needed and not worry that their payroll checks hadn’t cleared yet.Today that is less of an issue, as many people have direct deposit of their paychecks. The money is available immediately. However, if you write checks yourself, having the overdraft protection again is helpful to prevent you from accidentally bouncing a check, which may be covering your electricity, or health or life insurance. No one would want those to lapse because of a bounced check.You ask why there are fees. The answer to that is simple: the law allows the bank to charge that fee for the service. The money goes to the bank. It is revenue for them. How the bank uses the overdraft fee is the same as how they use revenue derived from any product or service.

You should get a loan from the place where you’ll get approved for a loan, assuming the loan is on reasonable terms.It’s hard to make generalities about comparisons between banks and credit unions … whether it’s lower rates, customer service, or convenience. You might expect that credit unions would have more customer-friendly policies .. like having more interest in helping you avoid bounced checks and associated charges, helping you to avoid late charges on your credit cards, and more generally, helping you to identify products and services that meet your needs rather than those that maximize the profit.BUT both banks and credit unions have to operate in a financially prudent manner.You haven’t told us anything about the loan you’re looking for, such as whether it’s secured or unsecured, how much will you be borrowing, etc. And also, you haven’t told us anything about yourself.If you’re talking about an unsecured loan, you really should be looking someplace where you already have an account. If it’s a car loan, then you have more choices. OTOH, if it’s a mortgage, you should seriously do some shopping around.Bear in mind that for a credit union, you must first become a member. These days, most credit unions are “community” credit unions, meaning you are eligible to become a member if you live or work in the community they serve (though some credit unions have a provision allowing you to join even without being in their community). There is usually a one-time joining fee, which is often $5. I would suggest that, even if you don’t want to borrow from a credit union now, you should look over the credit unions serving your area and join one, just so that you have some history with them. They’ll often have free checking accounts without a minimum balance (or at least one that’s much less than what many commercial banks require), so this might be something to consider over your current checking account.Most credit unions these days offer the same services you can get from banks, e.g. online banking, overdraft protection, various forms of electronic transfers, debit cards and credit cards. Your average credit union is more likely to participate in a surcharge-free ATM network than a bank is, and while this feature may be less important than it used to be, it’s nice to know that if you have to, you can get cash at a convenient ATM without having to pay several dollars in surcharges.