Even though you keep a record of your credits and debits in your check register you could get a notification that you bounced a check if you misjudge the timing of a deposit. It can happen to anyone. Many banks offer overdraft protection expressly for this situation. This account feature can eliminate the awkwardness of bouncing a check or having a problem with a debit card purchase. Overdraft protection allows you to link your checking account or money market account to a savings account so that funds can be made available to cover any debits from your transactional accounts.
Here is a quick guide to overdraft protection:
• Cover the difference. If you overdraw your checking or money market account by writing a check or buying something on your debit card, and you have overdraft protection, the bank will pay the difference. Your checking or money market account will carry a negative balance but you will not be charged a fee for overdrawing your account.
• Line of credit. The amount that you overdraw your account is charged to a line of credit. The bank, based on their policies and your credit history, will calculate your available line of credit. These funds are used to cover the difference. The bank may charge you interest on the amount that is borrowed from your line of credit or may charge you an annual fee for the protection.
• Payments. Payments to your line of credit are paid when you make a deposit. Funds over the amount owed to your line of credit will be deposited in your checking account. Be sure to read the terms and conditions for overdraft protection from your bank to understand if there are other requirements.
• Abuse. If you abuse your line of credit the bank can take it away. The line of credit is a short term solution, not a loan from the bank. Be sure to balance your accounts properly – overdraft protection is only a safety net.
While overdraft protection is a handy feature, the best way to avoid fees is to avoid overdrawing your account. But if you make a mistake, knowing you have overdraft protection can help you avoid any embarrassing situations. An overdraft protection plan may be handled differently from institution to institution so be sure to understand how the plan at your institution works.
Borrowing money is not something to be entered into lightly, so judging when you should take the plunge is important. Thankfully, quick payday loans online can offer credit within hours of applying, meaning that if you do need some money in a hurry, it can be available to you. This works to give peace of mind; if an emergency crops up, you should be able to get your hands on some much-needed cash relatively quickly if you need to.
However, although the option is available to you, it doesn’t always mean that it’s the best thing to do. Looking at reputable short term loans lenders only and knowing when to apply for credit can be as much a factor of a successful loan than making the repayments on time – if you apply irresponsibly, then you may find yourself in trouble somewhere down the line.
Non Emergencies: I can’t make my money last the month
If you’re struggling to stretch your money out until your next payday, then credit should not be your first port of call. Many people resort to payday loans in this instance, which can plunge them into a debt spiral which is difficult to get out of. In other words, they take a payday loan to get them to the end of the month, but have to pay it off on their next payday, meaning that they have to borrow again to last until the end of the new month, and so on.
Although there are few restrictions on what a same day loan can be taken for, borrowing a large amount simply for regular living expenses can mean that you never really identify the problem areas in your spending. Before rushing into applying for credit, you should sit down and write out a budget. Note down your total income and list your total expenses. Looking at your bank statements for the past few months should help you to account for everything. From here you should be able to see where your problem areas are, and you should try to adjust your spending accordingly.
If you feel the need to get credit in non-emergency situations then it may be a sign that you’re not managing your finances properly. Always make sure that you can afford the repayments for whatever credit product you choose before applying. Think ahead more than a month or two down the line – will the repayments be just as manageable then? How are the first couple of repayments going to affect your future plans? Continue reading