Overdrafts and bounced checks happen?
When you write a check, item withdraw money from an ATM, item use your debit card to make a purchase, or item make an automatic bill payment or other electronic payment for more than the amount in your checking account, you overdraw your account. Your bank (or your savings and loan or credit union) has the choice to either pay the amount or not. If it pays even though you don’t have the money in your account, you may be charged an "overdraft" fee. If your bank returns your check without paying it, you may be charged a "bounced-check," or "nonsufficient funds," fee. And the person or company that you wrote the check to for example, a store, your landlord, or the phone company may charge you a "returned-check" fee in addition to the fee your bank charges you.
The best way to avoid overdraft and bounced-check fees is to manage your account so you don’t overdraw it.
Keep track of how much money you have in your checking account by keeping your account register up-to-date. Record all checks when you write them and other transactions when you make them. And don’t forget to subtract any fees.
Pay special attention to your electronic transactions. Record your ATM withdrawals and fees, debit card purchases, and online payments.
Don’t forget about automatic bill payments you may have set up for utilities, insurance, or loan payments.
Keep an eye on your account balance. Remember that some checks and automatic payments may not have cleared yet.
Review your account statements each month. Between statements, you can find out which payments have cleared and check your balance by calling your bank or by checking online or at an ATM. Be sure to find out the actual amount in your account your account balance not including any funds available to you through "courtesy overdraft-protection," or "bounce coverage," plans.
Sometimes mistakes happen. If you do overdraw your account, deposit money into the account as soon as possible to cover the overdraft amount plus any fees and daily charges from your bank. Depositing money into your account can help you avoid additional overdrafts and fees.
What are "courtesy overdraft-protection," or "bounce coverage," plans?
Many banks offer "courtesy overdraft-protection," or "bounce coverage," plans so that your checks do not bounce and your ATM and debit card transactions go through. With these plans, you’ll still pay an overdraft fee or a bounce coverage fee to the bank for each item. But you will avoid the merchant’s returned-check fee and will stay in good standing with the people you do business with.