If a person does not have overdraft protection, each time a check is bounced, they must pay an NSF (Nonsufficient Funds Fee). This is usually $35 per check, an amount that can significantly add up if the bouncing is done numerous amounts of times. And this happens whether the check bounced is $1,000 or $10, though it should be noted that most banks would clear larger checks first, since they figure those are the payments that are the most important. Either way, a person will want to consider using overdraft protection to lessen the amount of NSF fees charged.

What is overdraft protection? Overdraft protection is when the bank uses another source of funding when a check happens to bounce. The best forms of overdraft protection will be the ones that draw upon accounts that are likely to have larger balances, such as a credit card or savings account. Funds can also be drawn from a home equity line of credit. Customers will still have to pay a fee, but it won’t be as high as what they would have to pay with an NSF. To get this form of overdraft protection, customers must ask for it from their bank.

Often banks will provide some level of overdraft protection as privilege not tied to another account. Although convenient, this protection could cause problems in the long run, particularly with chronic check floaters. With this form the bank will cover the amount bounced by a check. However, not only does a person have to pay for the amount the bank paid, but they must also cover the NSF, (which is charged only once through this arrangement).

Indeed, this is all well and fine with people who only have to use such a service occasionally. But there are many others who may live so closely, that they decide to ‘borrow’ from the bank when their funds are too low. This is not hard to do since many institutions will allow overdraft protection of several hundred a day. If a person relies too much on their ‘overdraft privilege’ they could not only get themselves laden down with debt but they may even be held criminally liable for the amount the bank covers. Intentionally writing checks that do not have sufficient funds may be construed as a form of fraud.

Overdraft protection whether it’s from one’s own personal accounts or from the bank directly, can be a great way to ensure a person doesn’t have to go through the embarrassment or the fees associated with a bounced check. However, caution needs to be taken with overdraft protection issued by a bank, since some may be more tempted to bounce more often. The main key with this form of protection is to only use it in case of emergency. And when it is used, one must make sure to pay the balance and the NSF fee as soon as possible.

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