Bouncing checks (writing checks for more money than is in your Bank account) can be a costly mistake. It’s always better not to bounce checks in the first place, but if you occasionally have trouble tracking the balance in your account and have ever bounced a check, you may want to consider Overdraft Protection. Keep in mind, you do not have Overdraft Protection on your account (even with a direct deposit) until you receive written confirmation from us that it has been added to your account.
Overdraft Protection is not a free ticket to spend more money than is in your account, but it can help reduce the typically expensive fees associated with having insufficient funds, including having your checks returned in the event of an inadvertent overdraft of your account. There is no fee for having this “safety net” on your account, you are only charged for this service if you overdraw your account. We charge a fee of $25 if you have insufficient funds for a check, debit or Electronic Funds Transfer. It is sometimes called a “non-sufficient funds” or “NSF” fee. The merchant or retailer to whom you wrote the check may also charge you a fee (typically $25 to $50 or more) for the bounced check, in addition to what you still owe them from the original purchase.
Here is how Overdraft Protection works for you. When you need more money than you have in your account, Overdraft Protection may allow you to withdraw funds, or write a check for more money than what is in your account, as long as the withdrawal or check is less than the amount of your balance plus the Overdraft Protection you have.
For example, suppose you do not have Overdraft Protection and your account balance is $50. If you write a check for $100, the Bank will charge your account a fee (currently $25) for writing a check with insufficient funds, and will then return the check. In most cases the merchant or retailer that you wrote the check to will require you to redeem the check and will probably charge you a fee (in this example, $25) for writing an NSF check. This means that you have now incurred fees of $50 ($25 at the Bank and $25 at the merchant or retailer) for a check that wasn’t even paid.
However, if you had $200 of Overdraft Protection, here is how the situation would have worked. When the check arrived at the Bank, the computer would have seen that you only have a $50 ledger balance in your account. However, it would also see that you have $200 of Overdraft Protection, which makes your available balance $250. This means that the Bank may pay the check and, if so, charge you the $25 NSF fee for an overdraft transaction. The total charge to you would have been $25 compared to $50 if you had not had available Overdraft Protection. Additionally, you avoid being added to any bad check lists on the check approval networks or with the merchant.
When you use your Overdraft Protection you must remember to subtract the overdraft fee from your account balance. In the example above you would have subtracted $125 from your account: $100 (the amount of the check) plus $25 (the amount of the overdraft fee). Your new balance would be a negative $75. Any additional items that come in while your account has a negative balance will also be charged the NSF fee of $25 per item. It is important to record these fees. The next deposit that you make will bring your balance to the amount of the deposit minus the amount you were overdrawn. |
