Ben Todd | Jun 3, 2017 | 2
How To Get an Overdraft Bank Account
In order to get an overdraft bank account, a consumer must choose a bank account that offers overdraft protection.
This protection is much needed since every year, banks rack in billions of dollars worth of overdraft fees!
What is Overdraft Protection
If you happen to charge something on your account and it goes over just by a couple of cents, you can be charged up to $50 per transaction! Because of this, many banks are now offering overdraft protection with their accounts. This is to always avoid the embarrassment of having transactions declined. You can also maintain a really good credit rating by using this method.
Overdraft protection basically allows you ‘extra’ credit on top of your bank account. If your bank account goes to zero, you can dip below zero with this service.
What Happens If You Don’t Pay Off Your Overdraft Amount?
Most banks will close your account if you don’t pay off your overdraft fees in a certain amount of time. If this happens, the bank account will go into default and it will be put on your credit report. Even worse, your bad banking behavior will get reported to ChexSystems (the banking ‘credit history’ reporting agency).
And also, when you try to open a new bank account, it will show in the ‘ChexSystem’ which is an online system to check for bad transactions made against banks.
Method 1: Go To Your Bank And Apply for Overdraft Protection
Before it gets to this point, it is advised to set up an automatic protection plan. Consumers most of the time will have to submit to a credit check. The protection will provide up to $500-$5000 worth of coverage in case of an overdraft charge. For certain VIP banking members (these clients have done business with the bank for a set number of years), they are able to get up to $10,000 of protection coverage. Repaying the coverage is also easy. Once you make a deposit into your account, it is withdrawed from your account’s original balance.
Method 2: Link Savings and Checking Accounts
Another method used to get an overdraft bank account is to link your savings and checkings account together. If the checking account goes into an overdraft, funds from the savings account will be used to cover it. This way, the consumer does not have to make a deposit to cover for the ‘credit check’ protection coverage offered by the bank. There are also no fees included in using this approach.
Some banks will charge an overdraft protection fee. VIP bank members are not charged every month and interest rates are usually only applied if the protection has to be used. For other accounts, the charge is $3 a month or overdraft interest fees (whichever one is higher). An extra $5 might be added for certain items. Again, these fees are all based on the bank that you do business with. Each branch has their own rules and regulations. Many banks do not offer overdraft protection at all.
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It is important to decrease any type of overdraft fees because they can really add up. It is just another bill that is not needed and it should be taken care of before it even starts. Many financial experts recommend linking a savings account to a checkings account in order to take care of overdraft fees before they even start.