Reason why the new Overdraft Fee Legislation took place: to stop banks from charging unwanted overdraft protection fees that could cost around $30 a pop.

To better explain this phenomena, imagine that you are enrolled in overdraft protection that charges $30 per overdraft occurrence and that you unknowingly have $30 in your checking account.

One day, you go run some errands,

buying $50 worth of groceries at Ralph’s

Current Checking Account Balance: – $20 | Overdraft Incurred: $30

then get gas at Shell’s for $30      

Current Checking Account Balance: – $50 | Overdraft Incurred: $60

Then your bank account was automatically debited to pay your AT&T iPhone cell phone bill of $130

Current Checking Account Balance: – $180 | Total Overdraft Incurred: $90

By the end of the day, you would have racked up $90 making three very normal, regular transactions! And guess what, if you don’t pay them on time, you can incur late fees on top of that too.  Would you rather pay $90+ worth of clandestine overdraft fees or have the option to not make those transactions by finding an alternative way to pay for them. For example, comparing overdraft protections and payday loans, the latter would probably be the better option because you are only charged a one time fee for the loan term (unless you decide to rollover). With overdraft, you are charged per transaction until you are brought current.

Maybe money management is an issue for you – maybe budgeting would be a better idea than any kind of loan or credit.  Do you like to make things by welding or soldering in the garage but end up overspending on tools or hiring help? Why not get a good work positioner to help you keep your work in place and reduce injuries? Do you like cake? Why not learn how to make it in your own kitchen instead of spending money on lavish bakeries?

Is a blind date worth an overdraft fee?

OK, maybe there are some circumstances where you may need to have this overdraft protection to save yourself from embarrassment: Maybe you’re on a date and it’s your turn to pay and you don’t want anyone to know that you don’t have anything in your bank account. Well in that case, you should probably check to make sure you have enough funds to go out before you make any commitments.

If you opt into overdraft protection, you can’t just turn it on and off arbitrarily.  Most of the time, if you knew that you didn’t have enough funds to pay for things, you would probably be better off not using overdraft protection because it can be very costly. So, when your bank has to ask you whether you want overdraft protection or not before automatically enrolling you – just say “No!”

Banks profit from having a person become their customer – in the long run.  That’s why some banks are offering cash and prize incentives to obtain a client, hopefully for life.   Once they get you in the door by offering some nice little perks, they hope to sell some other things too, like a money market account, overdraft fees, and more.  Some of them may of value to you and some you would better avoid. Check out this article for more information.

This financial brief was brought to you by Pay1Day.com.