If you use your debit card to make a purchase but don’t have enough money in your account, chances are good that your bank will allow the transaction to go through, helping you avoid the embarrassment of a checkout line rejection. However, as pointed out in a recent CNNMoney.com article, there’s a cost to the bank’s kindness – an overdraft fee, often as high as $35. Banks generated over $17 billion in overdraft fees in 2006.
The best way to avoid overdraft fees, of course, is to know your bank account balance. A second-best option, if you maintain a savings account at the bank where you have a checking account, is to sign up for a type of overdraft protection whereby funds in your savings account are automatically transferred to your checking account if needed. There will still be a fee, but it will be much less than the other type of overdraft fee. If you sometimes have a low balance in your checking account and you have a savings account at the same bank, see if this type of overdraft protection is available. Usually there’s no fee to sign up.