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Pay any bills you receive each month as soon as you get them.

 
home › economic survival tips › Housing & Mortgage › I Missed a Mortgage Payment - What do I do? › Is Overdraft Protection a Good Idea?

Is Overdraft Protection a Good Idea?

 
  • Check the interest rate. Overdraft protection can put enough money back in your account to keep a mortgage payment check from bouncing. But, since it’s not covered by laws that regulate interest rates, you could wind up paying a very big premium for the right to overdraft your account.

  • When does it kick in?  With overdraft protection, your bank’s decision to cover your overdraft or let your check bounce usually depends on how often you’ve overdrawn your account in the past.

  • What are the fees? Even if the bank decides in your favor, it will charge you a fee that can be steep. And you’ve got to repay the negative balance to straighten out your account. If you don’t do this quickly enough, your credit rating will suffer.

  • Know the limit. Be careful: overdraft protection can offer a false sense of security. If you exceed the protection limit, you’ll incur penalty fees on top of the interest rate or fee attached to the overdraft itself.

  • Don't depend on it. Some banks may combine your actual balance with your overdraft funds and show it as your available balance. That can be very misleading.

 

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