We all know that we should read our bank statements, don’t we? Many of us still don’t take this step, since reviewing bank statements can be boring, tedious or reveal issues that we simply don’t want to deal with. The problem is that there are many financial problems that you may be at risk for, and your bank statement often gives you a warning or even a clear declaration that something is wrong. Make reading your bank statement a regular and protected task, and look for the following signs that something is amiss and needs to be addressed.
Paying attention to these issues can will put you in a healthier financial state.
Let’s Talk about ODP
When reviewing your bank statement, if you see the initials ODP, you may want to take action. ODP stands for overdraft protection, and while it may seem like a good thing (if you write a check that is more than you have as balance in your account, the bank will cover the difference), it is really a source of expensive fees. Think it isn’t worth the effort to follow up on ODP? Know that Americans spend billions of dollars a year in overdraft protection fees.
Many people opt for this coverage because they don’t want to bounce checks, but there is a better way to protect yourself from bouncing, which I will get to in a moment. It used to be that overdraft protection was automatic on many accounts, before new rules protecting consumers were enacted, so if you have an older bank account you probably also have ODP.
With ODP, your bank will cover the difference through a linked ODP account. It will also charge you a steep fee (usually about $35 per transaction) plus high interest on the “loan” of the transaction. In addition, if you don’t notice the overdraft for five days or more, you will probably also be charged an additional $35 extended overdraft fee. This mean that if you were a mere $10 short, you could wind up paying more than $80 plus interest, or eight times the overdraft!
Your best bet is to opt out of the overdraft protection and instead create a savings account that is linked to your checking account. If you overdraft your checking account, the money will be automatically transferred from your savings account for a much smaller fee. Some banks will actually waive this fee altogether.
Of course, it is best not to overdraft your account in the first place. You can take some steps to make sure that you are less likely to put yourself into an overdraft situation, such as checking your account frequently. Many banks offer a free low-balance account alert. The alert will let you know when your balance falls below a set amount, leaving you aware and prepared.