Overdraft Charges Galore

Your checking account is low, showing a balance of just $81. Payday is tomorrow, but the rent is due today, so you decide to write a post-dated $700 check and take it to your rental office before its closes for the day.

Meanwhile, you spend $40 at the gas station, $19 on groceries, and you take $10 out of the ATM, leaving just $12 in your account. With a direct deposit in the amount of $1500 expected the following day, you are confident that all of your bills will be covered, at least for now.

Tomorrow arrives and you go to work looking forward to the coming weekend. While taking a break, you decide to log on to check your bank balance, expecting to confirm that your pay was deposited.

Unfortunately, you’ve just had one of the worst shocks of your life: all four transactions were posted to your account yesterday, starting with the biggest chunk of money, your rent, followed by the three smaller transactions. Suddenly, it dawns on you that you’ve been hit with a $33 fee, monies which you planned to use to cover other household expenses.

The Worst Isn’t Over

If you think that the $33 overdraft fee is the worst of this person’s trouble, think again. Many banks will charge a customer for each overdraft, meaning the unnamed consumer would be hit with four charges, bringing his overdraft expenses to $132.

Most consumers are not aware that banks withdraw money from accounts by the largest amount first when debits come in on the same day.  In this case, the consumer thought that he was okay, finding out later that the rental office was able to deposit his check before the bank closed. That moved triggered an immediate overdraft, followed by three small debits which incurred their own fees.

Overdraft Protection?

To help customers avoid overdraft charges, most banks also offer overdraft protection whereby the bank will cover the needed funds, depositing money in increments of $100 to cover overdrafts. When that happens a fee is charged for the overdraft (usually $5) and interest is charged to a credit card tied in with that account. If the credit card isn’t paid off in full, then additional interest charges will accrue.

Some banks force credit protection on their customers, though many still offer it as a “convenience” option. Each time the bank must charge your credit card to provide the funds needed to pay for overdrafts means you’ll pay a fee. Though the cost of not having overdraft protection is much higher than the account that offers this option, fees can add up and credit card bills must be paid.

Consumer protection in this area is very weak with banks allowed to basically do what they want to do unimpeded. Some financial institutions will limit their overdraft charges to 5-7 charges per day, but you could still be hit with big fees.

In worst case scenarios the bank could tell creditors that you have overdrawn your checking account. That usually doesn’t happen unless you refuse to make good on what you owe them, but it is something you’ll want to keep in mind the next time you write a check when the monies have yet to be deposited into your account.

Resources

Budget Your Money

Control Your Debt

Increase Your Income

Lower Your Bills

Protect Your Credit

Tags: cash, checking account, checks, deposit account, overdraft, overdraft protection

Four dollars per gallon gasoline is making a mess of many home budgets as is higher food costs, mortgage payments, and other consumer goods. The average American is feeling the sting of diminished earnings, putting a real crimp on savings.

One of the last things you want to do when life is tough is to cut back on savings. That extra money can pay for future emergencies, help fund your retirement, and cover vacation, home improvement, and other anticipated expenses.

But, saving money when your disposable income has shrunk seems virtually impossible to do. Or is it? Can there be a way to set aside money even when the cost of living continues to rise? Let’s take a look at some common sense ways you can lower your bills and still have more money left over to save.

Food — Milk, bread, bananas, you name it has been going up in price, much fast than the inflation rate. Transporting food from warehouse to store has gotten costlier and those costs are being passed on to you. Wherever possible, clip coupons to save on your favorite foods while switching to generic or less known brands when you can. Shop the warehouse clubs and you could save 10-30% off of your food order.

Insurance — If you combine your homeowners insurance with your auto insurance, then you should receive a ten percent discount on your bill. Shop around too and take a good look at your 2001 model year car with high miles — it could be time to drop collision coverage.

Debt — Pull out your credit card statements and examine which ones have jacked up their interest rate recently. If you are carrying balances on high interest rate credit cards, then transfer those balances over to a lower rate card. Many card providers are still offering 0% interest on balance transfers with some waiving transfer fees too.

Cable and Phone — If you haven’t combined your phone and cable service yet, consider doing so at once. Get an internet connection, cable service, and local and long distance coverage for a flat monthly rate. You should be able to save 10-50% by combining your bills to one service provider.

Electric and Gas — If you have central heating and air, keep the indoor temperature at 78 degrees in the summer and 68 degrees in the winter. Supplement cooling and heating with ceiling fans, reversing oscillation for the proper season.

Dental and Health Care — If you are covered through your employer, then medical costs are a known quantity. Still, you can reduce your expenses by using “in network” doctors and labs, get your prescriptions filled at WalMart or a similar store offering cut rate medication services. If you need insurance on your own, shop through a cooperative to get the lowest rates.

Miscellaneous Expenses — Perhaps the greatest savings can come through the elimination or curtailing of various vices. Quit smoking, stop drinking, avoid gambling (including the lottery!), and take a hard look at your entertainment expenses. Take in a matinee instead of a night movie; eat out less each month.

Finally, with all of the money you save you can start setting aside some cash for savings. Maximize your employer’s 401(k) plan and set up automated savings through an online bank such as ING Direct to withdraw money on a regular basis from your checking account to a savings account.

The national economy will eventually improve, but you don’t have to let your personal economy take a hit while you wait for that to happen.

Tags: budget, cable, checking account, credit card, electric, food, gas, Money Management, personal finance, save money, savings, telephone, utilities