by J Grady

Created on: February 26, 2007   Last Updated: April 13, 2007

We have all had to do it at some point you have an unexpected bill arrive, an emergency, you need groceries and you are tempted to overdraw your checking account. Do not do it! Unless you are in some dire emergency do not even think about doing this. Some people (usually us with the least amount of money) actually seem to view overdrafting as a type of credit line. Do not fool yourself! Not only is writing a bad check or making a purchase that you don't have the funds for a punishable crime; it can generate hundreds of dollars in fees overnight.

Common Misconceptions

1)Overdrafting is not a form of credit

2)The bank is not going to call to warn you that your balance is low or that you are overdrawing your account. It is your responsibility to manage your account. At most you will probably receive a notice in the mail. It can take a few days to receive this by mail so you could have made several other purchases by then. Unfortunately, this is not the banks fault. You have to take responsibility in managing your money. (update: some banks have started offering balance alerts on accounts - but be aware - unless you have an additional account to transfer funds from, you probably will not make it to the bank in time to make a deposit).

3)Cash deposits go in immediately this is not always true. At some banks you can use your cash immediately, but be aware if you do not make your deposit by the banks cut off time, those funds will not cover any posting items that night, but your debit card purchases (that you thought you could use that cash immediately for) will be deducted from your balance or placed on hold, causing overdraft fees. Again, you agreed to all of this when you opened the account.

4)Debit/Check cards are not credit cards! Just because you choose the credit option you are not tapping into a credit line. The money comes from your checking account. People actually believe this and never question where they expect that money to come from. Also, at most banks there is generally no difference between the time frame for posting no matter which option you use.

5)Most banks have the right to offset. If you're on a joint account with your brother and he has a separate personal account that he overdraws, they can take all of the money from your joint account (even though you didn't do anything wrong). Doesn't sound fair? Again, you agreed to this when you signed the papers. No, it's not a scam, the bank is watching out for their interests. They will get the money that

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