It is a simple thing on paper. You only spend the money that one has in their Servicemember bank account or checking account. But with the ACH and automatic debts, the online banking, and the variety of users in a single family, it is possible for an account to go into the red.
When this happens, it is not a good thing. Most banks have identified insufficient funds as a huge loss for them, and so they pile on the fees and penalties. In a typical account, for each incidence of overdraft, you can get a fee for every single one. Say you have five checks hit, at the same time. One check, the smallest, puts you over the limit. The others not only are likely to be rejected (resulting in check bouncing fees with your vendors or stores that took the checks) but they are also likely to cost you at least thirty dollars for each incidence.
So, the checks are returned, unpaid.
Your account is suddenly at least one hundred twenty dollars in the negative.
And you feel like you need the number of the truck that just hit you and ran you down.
Maybe you have had this happen to you? If so, you know how easy it is to suddenly feel bewildered and confused. What is necessary is that you try as hard as you can to avoid this kind of predicament. Not only does it damage your credibility with your bank or lending institution, but it also can make your local stores refuse your checks, and not allow you to write checks.
Repeated offenses can land your name on a national list, and the fees can grow higher depending on the policies of your institution. Eventually repeat insufficient funds can lead to your account being closed, and difficulty opening an account anywhere else. So what can you do? Well here are a few things you can do to help prevent insufficient funds.
Overdraft Protection. Some banks offer this for free, for the first couple of incidents. If it is not something you struggle with all the time, then this type of once in a great while protection may be plenty.
Overdraft Account. Banks or lending institutions will often allow you to use your savings, or to create another account with a small balance, to help insure against being overdrawn. The two accounts are linked, and if you accidentally dip beneath the available funds in your checking a small amount is automatically transferred to cover your check.
Register Zealot. Learn to be very disciplined, and write all your transactions down. If other family members have access to the main family account, consider opening up a smaller individual account for them. Not only does that make them more accountable and teach money discipline, but also it allows only you or perhaps you and your spouse to have access to the main account. This results in less confusion and more readily tracked finances.
