You can save money by balancing your checkbook every month and keeping a running total. The Center for Responsible Lending has just issued a new report “Out of Balance” warning against the high interest rates that the banks are charging to cover your items if you overdraw. The report speaks out against what it calls unfair banking practices that can cause the customers to accumulate more fees.
The Center for Responsible Lending is supporting bill HR 946, which would put overdraft loans under the jurisdiction of the Truth-in-Lending Act. This could mean that the banks must notify you if you are close to overdrawing. It is also important to realize that these fees are one of the banks biggest sources of revenue.
I have written warning against the dangers of using overdraft protection in the past. Most banks charge between twenty and forty dollars per item that they pay on. They will usually stop paying into the negative at around three hundred dollars. If you stop and consider the amount of the fees, the interest rate is ridiculously high. While the congress may pass this law to help protect consumers, it is important that you take responsibility to protect yourself now.
You should keep a running balance of the money that you have in your checking account, and you should not rely on the balance you receive at the ATM. You should not assume that if they let you use your debit card, that it means that you have enough money. Personal responsibility will help to prevent this problem and stop you from entering the overdraft cycle. In many ways this is similar to the payday loans companies practices, you need to be informed in order to protect yourself.
If you hate balancing your checkbook, and you regularly take advantage of these services you could be costing yourself hundreds of dollars over the year. Take the time to learn how to balance your account and do it consistently.