Overdrawn Accounts Fuel Banks
I remember being young and new to banking. With my account I received an ATM card, a relatively new invention at the time. I used my ATM card freely to withdrawal cash or spend money. Here’s the interesting part, if there was no money in my account my card wouldn’t work and the transaction would be denied. I remember feeling terribly embarrassed when it occurred, but it was definitely better than the alternative of ridiculous bank fees and an overdrawn account.
I’ve been wondering–do transactions ever get denied. Not too long ago, one of my accounts was overdrawn and my ATM card worked the whole time. It’s terribly unprofessional to send your account in the red when you’ve built your business around accounting. But it happens. I could list the reasons, but it’s just part of life.
When my account was overdrawn, I was never denied use of my card. A few overdraft charges followed and in one day I was out almost $80 in overdraft fees. I was amazed at how quickly my money wasted away…and on bank charges. It was more profitable for the bank when my account was overdrawn. Denying my transaction would cost them money! It seems as thought the banking industry has shifted to a credit extending industry. I bet they are able to stay in business from the revenue of insufficient funds fees alone.
The transition to electronic banking has done us a great disservice. Do you check our account balances on line before going shopping? Do you subtract every one of your outstanding transactions”all the ones that haven’t posted to your account yet? Probably not!
Many people think there is no need to keep a check register because all their information is online. This exemplifies the banking industries success in weaning us from keeping our own account registers. Remember, online banking websites are not aware of our outstanding transactions. They only show what has actually posted to our accounts.
Keeping track of what you’ve actually spent WILL prevent you from having an overdrawn account. If your check register shows a negative balance before you spend money, you’ll think twice about the necessity of the purchase.
Perhaps you’ll still decide to make the purchase and accept paying your banks fee. However, if you need to live on credit a 0% or low interest credit card could be cheaper than continually overdrawing your account.
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Bank overdraft fees are terrible but at the end of the day, it is the responsibility of the consumer to know how much money is in their account. As a banking professional, my suggestion to clients who have consistant overdrafts is twofold, first, use online banking. It is the most accurate way to know your balance, most of the major banks show transactions in real time and second, open a second checking account, most major banks offer free accounts if you use online services. When you are paid, transfer the amount that you need to pay any bills (rent, car, insurance, credit cards) to the second account and then either pay online or write checks. The beatuty is that even if it takes two or three weeks to clear your account, it has already left your primary account and you do not have to account for it when it comes to figuring out your balance and aside from just being irresponsible, the biggest reason for overdraft fees is forgetting about a check that has been written.