Manage Your Checking Account and Stay On Top of Your Finances

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This is a guest post from Debt Lead, who has a debt consolidation website by Kimberly Credit Counseling.

Many consumers underestimate the potential cost of a mismanaged check account so let’s look at how to stay organized with a managed checkbook and protecting ourselves with overdraft protection.

Staying Organize with a Balanced Checkbook
When you balance your checkbook, it requires that you keep track of all transactions you have made through your checking account, including direct deposits and debit card purchases. Most ATMs will give you a receipt with your withdrawal, but this balance may not include outstanding checks that have not cleared your account. Once you get home make sure you put all transaction that you did into your checkbook.

To keep an accurate balance of your checking account, make sure you balance your checking account every month and review it against your monthly bank statement to make sure your numbers are correct. To reconcile your account, you must compare your bank statement to what you have written in your check register. Check off each item in your checkbook that matches the corresponding amount on your bank statement. If there are any transactions on your bank statement that do not match or appear in your checkbook, you need to get to the bottom of this and adjust the transactions so they match with your checkbook. If the bank statement amount is not accurate or valid, you should notify your bank immediately of the discrepancy.

Overdraft Protection
Banks offer overdraft protection to prevent bounced checks. Some banks will automatically enroll checking account customers into a program where the bank covers overdrafts for a fee, which could exceed $30.

Overdraft protection is a good way to protect yourself from inadvertently writing a check that you did not have funds to cover. Below are the common ways that banks offer overdraft protection:

Checking Account Linked to Savings: If your checking account does not have the funds to cover a check or debit, money will be taken from your savings to cover the amount. Overdraft fees still apply if your savings account balance cannot over the expense.

Linking to a Credit Card: Banks can link credit cards to the checking account to avoid overdraft fees. Usually, banks will transfer more than is needed to cover the overdraft (usually in $100 increments) and you will be charged for the interest equivalent to a credit card advance.

Tied to Line of Credit: If you have a line of credit established (usually tied to your home), the bank will transfer funds from this account to cover any overdrafts made to your account. Interest is then charged on the amount of money transferred from the credit line.

Overdraft protection is also a great way to guarantee that your credit score will not be negatively affected. Ultimately the end result of this protection guarantees that a bad check will never appear on a credit report and may ultimately enhance your credit score even though the costs to you may be high.
Let’s reduce our banking fees by staying organized and on top of our finances!

Tagged as: Bank, Money Management, Overdraft

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