If you want to learn how to overdraft your bank account on purpose, you got to the right article. The first step is to enroll in your bank’s overdraft protection service. Overdraft protection covers you if you spend more money than you have in your account. If you have, say, $40 in your account but use your debit card at the gas pump, it will automatically charge your account $70. This puts you in immediate overdraft. Even if you only get $5 worth of gas – because you know your account is getting low – the bank will show a $70 debit followed by a $65 credit from the gas pump. And, you get a $35 overdraft fee!
So, that $5 of gas ended up costing you $40, which was everything you had in your account. Now, you are really in trouble!
In the old days, banks would allow people to overdraft their accounts every now and then and cover the purchase, knowing that the account holder would “be good for it” later. However, federal regulation put an end to that, and now you have to sign up for overdraft protection. With this service, you will be charged the $35 by your bank, but the point of purchase will receive their payments on time. This saves you from having to pay returned check fees. If you overdraft too much but actually need to overdraft, you should check out banks with no overdraft fees.
If you write a check and don’t have enough money in the bank to pay it, the check will bounce. This means that the bank will not pay the amount to the person you wrote the check to. If it is a friend or family member, it can be really embarrassing. If it is a business place, it can be catastrophic.
This is because the vendor to whom you wrote the check will still expect to be paid, but will also charge you a returned check fee. Usually, that fee is $20 to $25 dollars. The bank will also charge you $35 for non-sufficient funds fee. Some banks then add a $5 negative balance fee, as well!
Some vendors get so mad when you write them a hot check that they will call the authorities or report you to the credit agencies. If the check you wrote was for your utilities or rent, you will have a late fee tacked on to the snowball of debt.
However, if you have some form of overdraft protection with your bank, you will still have to pay the overdraft fee, but you will be spared all of the other fees that accumulate from returned checks and late fees. In addition, with overdraft protection, your point of purchase receives their money so you don’t get in trouble on that end.
CHECK OUT>> Can you overdraft a debit card
Debit Card Purchases
We’ve already mentioned the problem at the gas pump. Most of the time, however, if you try to use your debit card and don’t have enough money, it will be declined. There is no fee, but you don’t get to make a purchase, either.
If you use your debit card for most purchases, there are 2 scenarios to consider. If you do have overdraft protection, you may blithely spend money with your debit card, not realizing that you are in the red. You will pay the overdraft fee for each purchase! So, that $3 cup of coffee may cost you $38!
If you don’t have overdraft protection, your debit card will be declined when you run out of money. You may not be willing to pay the overdraft fee on a series of purchases. If you want to manage your money in this way, go for it. Some people want to be sure they can spend the money, especially if they are buying groceries.
Most banks offer overdraft protection. You have to request it and opt in. In some cases, you can get an overdraft line of credit. This is a “loan in waiting” that is an agreed amount – say $1000. If you go overdrawn with your account, the loan will cover it. Your fee is interest on the amount you overdrafted. You usually need a pretty good credit score for this kind of protection.
The other kind of overdraft protection covers your account for $200. You pay the $35 fee each time you use this service, and it is taken out of your account. As you can see, this can tap out your account pretty quickly.
You can also link your checking account to your savings account. Automatically, if you go overdraft in your checking account, your bank will automatically transfer money from savings to checking. You can also link it to your credit card, but remember that cash advances on your credit card have EXTREMELY high interest, and they are paid off last on your credit card.
Some banks offer “Courtesy Pay.” It hearkens back to the good old days when banks covered for their clients, with the understanding that the loan will be repaid within 30 days. This type of arrangement often has some kind of fee, too.
Just because your bank will cover your purchase does not mean you should deliberately overdraw your account. It is your responsibility to manage your money so that you live within your means. However, the good news is that most of us have a little wiggle room there until we get things figured out. Overdraft protection should be only for rare occasions. Remember that this money is not free. Of course, you will probably remember than when you pay the overdraft fee.
Overdraft Protection Apps
The other option is to sign up for overdraft protection apps. These can provide you with a small loan until your paycheck comes in, and cover your purchases if you make a mistake