Whether by accident or out of necessity, many of us have — at one time or another — overdrawn our checking account. If you’ve done it, you were probably charged an overdraft fee. Understanding overdrafts and what to do when they happen is an important part of managing your personal finances.
What is an overdraft?
An overdraft occurs when you don’t have enough money in your account to cover a transaction, but the bank pays it anyway. This causes your account to go into a negative balance, or overdraft. A transaction that would otherwise make your account balance negative and that the bank returns unpaid is called an insufficient or non-sufficient funds transaction (NSF).
Once your account is overdrawn, you are responsible for paying the amount of the overdraft, plus any overdraft or NSF fees your bank may charge.
How can I manage overdrafts and protect my account?
Of course, the best way to avoid overdrafts and fees is to keep track of your expenditures so you won’t spend more money than you have. But with all the different ways to spend money these days – ATMs, debit cards, automatic payments deducted from your checking account – it’s understandable that a slip-up could occur. That’s why we offer a variety of Overdraft Protection Plans to help you manage the occasional overdraft, such as linking your checking account to another deposit account or to a line of credit. Once set up, these accounts automatically cover your overdrafts up to the available balance in the deposit accounts or the available credit in the line of credit account.
There are also occasions when overdrafts can save you the embarrassment of having a purchase declined and help you avoid late fees and other penalties charged by a merchant if your check gets returned NSF. An overdraft can also help ensure bills are paid by allowing, for instance, a loan payment to be processed that would have otherwise been returned unpaid. While we can pay your checks and other electronic items into overdraft at our discretion, you must opt-in to our Standard Overdraft Services if you want us to consider authorizing and paying your ATM and everyday debit card transactions into overdraft; otherwise those transactions will generally be declined when there are insufficient funds in your account.
Did you know that one way we assist our clients with overdrafts and NSF items is by limiting the related fees? On any given business day we provide the following benefits:
- No overdraft fee is charged when your account is overdrawn $5 or less at the end of the day
- No overdraft or NSF fee is ever assessed on transactions of $5 or less
Learn more about our Overdraft Protection Services, including applicable fees, here.
Take a look at this video to learn more about how our Overdraft Protection Services can protect your accounts:
The best financial strategy: good money management
Banks offer overdraft protection as a benefit to their customers, and the services can provide needed funds in a pinch. But you should always avoid digging yourself into a hole that you can’t climb out of. At the end of the day, overdraft services are no substitute for good money management:
- Make a budget and balance your checkbook on a regular basis
- Avoid impulse buys by taking a list with you when you shop
- Households with shared accounts should only give one person control of the debit card and checkbook at any one time to avoid accidental overspending
- Use online and mobile banking to keep up with your account balances, and consider activating debit card alerts to track expenditures
Overdraft protection is a money management tool that you might not think about often, but could be something to consider as part of your everyday money management strategy. If you’re interested in learning more about overdraft protection, talk with a Hancock or Whitney banker to see if these services are right for you and your financial situation. Call 1-800-448-8812 or visit one of our financial centers today.
Did you find this information useful? Subscribe to Insights by adding your email to the form below, and receive regular news and updates about smart money management directly in your inbox.
We provide links to external web sites for convenience. Hancock and Whitney Bank do not endorse and are not responsible for their content, links, privacy or security policies.