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Why Bank Overdrafts May Be A Bad Deal For You by:

Why Bank Overdrafts May Be A Bad Deal For You by: Prakash Menon Many banks actively encourage their clients with low balances to overdraw their accounts. That means, if the customer writes a check or uses her debit card and has insufficient funds in the account, the bank clears the check by granting a temporary overdraft (a short-term loan), up to a specific limit. The customer is saved from the problems of bounced checks or interrupted shopping sprees.

Sounds like a good deal for the customers, right? That's what the banks say. They claim overdrafts are an added convenience to customers.
The truth is, they're often a very bad deal for the customers.

Here's why.
When a bank grants a regular line of credit, the interest charged may be up to say, 20% or so.

However, for overdrafts, banks don't charge interest -- they charge a flat fee on each transaction. A fee that does not depend on the value of the transaction. Let's see how that works.

Overdraft plans fees may be as high as $35 per check. We'll assume a more conservative fee of $20 per check.

If you have four checks totaling $200 that have insufficient funds against them and the bank automatically activates the overdraft and clears those checks, you will owe $80 in overdraft charges.
Unlike revolving lines of credit which you can repay at your convenience, an overdraft has to be settled in just a few days.
Let's say the bank allows you to run the overdraft for 14 days. A loan of $200 for 14 days incurring charges of $80 translates into an Annual Percentage Rate (APR) of 1043%!

A "convenience" for customers? Not at these rates. What does this remind you of?
It reminds me of payday loans and cash advances. Thats the other kind of lending that costs you such sky-high APRs.
In fact, if you choose to repay a cash advance on due date and not roll it over, you'll likely be charged far less than what the banks charge you for an overdraft.

It gets even worse. Banks have software that ensures that your largest value checks and debits get processed first. There may be some logic to that.

However, this arrangement also means that when there are insufficient funds in your account, instead of paying one overdraft charge on one large check, you pay several charges on several smaller checks! Plus, most customers don't even realize that they are overdrawn until the bank notifies them about it. Consumer advocates say that banks are perfectly aware that many people barely make it from payday to payday.
These customers typically have very low balances. Rather than offer them a service that would be in their interests, banks extract high fees from them to cover bounced checks.

If you are caught short between paychecks, consider arranging funds from other sources rather than turn to overdraft protection.
The best solution to the problem is to systematically build up cash balances so that you don't face such a situation in the first place. About the Author: Prakash Menon is a financial expert and writer specializing in managing personal debt and providing wealth building solutions. He has written on signature loans, personal debt management and other topics.

See http://www.payday-cashadvances. net for related articles.

Source: www.
isnare. com .

There are No Secrets to Earning an Above Average Income and everything you need to know how its done is right here in my Income Producing Website.

Tri-Liminal Phenomena will Crank Your Mind Into High Gear. Attract Financial Success, Achieve Personal Goals. Eliminate Negative Habits and Behaviors.

Fall Asleep Faster, Fall Asleep Deeper, More Restful Sleep, Deep Zen Meditation States - Merge With The Universal Mind.

Triliminal Phenomena Part 1

An extensive survey on success mind-set . I am pleased to bring you Professional Reviews and Personal mutimedia views on success mind-set , including the most current products online for success mind-set from clickbank, amazon and reg_now .

To Boost my Daily Sales.

Please Buy some Bidvertiser Advertising from me.

The Landing Page is content rich with

Product Feeds and I get paid directly by them.

My Income Producing Website is Automated For Daily Income equipped with an Automated Clickbank Weekly Paycheck Generator

Every Day Thousands buy Clickbank Products, Amazon Products, Digital River Products from me right here.

Clickbank, Amazon and Digital River pays me Commission Directly.

Please Buy Something From my Clickbank Marketplace Here

Please Buy Something From my Amazon Webstore

Please Buy Something From my REG_NOW Webstore

Swarms of Hungry Shoppers come right here (as well they also visit my 143 Income Portal Locations Worldwide) to buy, and every penny in commission is paid directly to me.

Why Bank Overdrafts May Be A Bad Deal For You by: