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Avoiding Overdraft Fees

PROTECTING YOURSELF FROM OVERDRAFT FEES

How do overdrafts and bounced checks happen?

When you -

  • write a check,
  • withdraw money from an ATM,
  • use your debit card to make a purchase, or
  • make an automatic bill payment or other electronic payment

for more than the amount in your checking account, you overdraw your account.

The bank has the choice to either pay the amount or not. If it pays even though you don't have the money in your account, you may be charged an "NSF Paid" fee. If the bank returns your check without paying it, you may be charged a "NSF Return" fee. And, the person or company that you wrote the check to may charge you a "returned check" fee in addition to the fee the bank charges you.

How can you avoid overdraft and NSF fees?

The best way to avoid overdraft and "non-sufficient funds" fees (NSF fees) is to manage your account so you don't overdraw it.

  • Keep track of how much money you have by regularly balancing your checking account. All checks should be accounted for plus any other transactions. And, don't forget to subtract any fees.
  • Pay special attention to your electronic transactions. Record your ATM withdrawals and fees, debit card purchases and online payments.
  • Don't forget about automatic bill payments you may have set up for utilities, insurance, or loan payments.
  • Keep an eye on your account balance. Remember that some checks and automatic payments may not have cleared yet.
  • Review your account statements each month. Between statements, you can find out which payments have cleared and check your balance by calling your bank or checking online or at an ATM.

Sometimes mistakes happen. If you do overdraw your account, deposit money into the account as soon as possible to cover the overdraft amount plus any fees. Depositing money into your account can help you avoid additional overdrafts and fees.

What is an "Overdraft Privilege" plan?

Many banks offer "Overdraft Privilege" or "bounce coverage" plans so that your checks do not bounce and your ATM and debit card transactions go through. With these plans, you'll still pay an overdraft fee to the bank for each item. But you will avoid the merchant's returned-check fee and will stay in good standing with the people you do business with.

How much does the "Overdraft Privilege" plan cost?

The "Overdraft Privilege" plan sets a dollar limit on the total amount your account may be overdrawn at any one time. For example, the bank might cover overdrafts up to a total of $800.

Example: Suppose you forgot that you had only $15 in your account and wrote a check for $25, used an ATM to get $40 cash, and used your debit card to buy $30 worth of groceries. In these 3 transactions you've spent a total of $95 – and overdrawn your account by $80 ($95 - $15 = $80). How much will this oversight cost you?

If you are part of the "Overdraft Privilege" plan, the bank may decide to cover all 3 transactions. And each of the 3 overdrafts will trigger a fee. You will owe the bank the $80 that you spent even though it wasn't in your account, plus the 3 overdraft fees. If the overdraft fee is $35 per item, you will owe the bank $185 ($80 + $105 (3 X $35)).

Business accounts will be charged overdraft interest calculated on the average negative available balance for the statement cycle period at 1.5%.

What is another way to cover overdrafts?

Inter National Bank also offers a less costly alternative that would allow for transfers to be made by linking another of your accounts, such as your savings, to your checking account. The cost for processing this type of transfer to cover NSF items is only $17.50 per day.

The choice is yours. Consider these ways to cover your overdrafts:

Ways to cover your overdrafts   Example of possible cost for each overdraft*
Good account management  

$0
 

Link to Savings or other Checking Account   $17.50 transfer fee per day*
Overdraft Privilege Plan   $35 per item*
Bounced Check   $35 per item*

*These fees are subject to change.

What do you need to know about Overdraft Privilege plans?

Avoid using these plans as short-term loans – they are costly forms of credit.
If you overdraw your account, get money back into your account as soon as possible. Remember that you need to put enough money back into your account to cover both the amount of your overdraft and any bank fees.
Even if you have Overdraft Privilege, there is no guarantee that the bank will cover your checks, ATM withdrawals, debit card and other electronic transactions that overdraw your account.
Good account management is the lowest-cost way to protect your hard-earned money.

For more information about protecting yourself from overdrafts, please visit this link. 

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