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Five ways to avoid a bouncing check
By Kevin
McDonald • Bankrate.com
Do you really know how much cash is in your
checking account?
If you're not sure, the next check you write could
take on a costly rubbery feel.
Nonsufficient funds or NSF fees have risen steadily
over the years. On average, it costs more than $25 to bounce a check,
according to Bankrate.com's
Checking Study. But there are ways to prevent this embarrassing
and costly snafu. Some of them include:
- Balancing your checkbook
- Recording all ATM/debit transactions
- Staying on top of automatic deductions
- Using overdraft protection
- Reporting a lost or stolen checkbook immediately
Balance that checkbook
It sounds elementary, but balancing your checkbook
can be the best preventive measure. Begin by writing down every
withdrawal and deposit. If you withdraw $20 from an ATM, write it
down. If you deposit a $100 check from Uncle Sam, write it down.
A well-kept checkbook makes it easier to spot mistakes when you
compare it to your monthly bank statement. Unfortunately, the popularity
of ATMs, automatic deductions and debit cards -- conveniences that
immediately deduct money from your account -- make balancing your
checkbook more challenging, says Joel Houston, an associate professor
of finance at the University of Florida in Gainesville.
ATM/debit cards
Most institutions charge noncustomers a fee for
using their ATMs. The fee is usually $1.50, but some charge $2 or
more.
Debit cards, on the other hand, do not carry surcharges.
They work just like a check -- money is siphoned from your account
when the card is used. Keep in mind that debit cards offer less
leverage than a credit card when returning a purchased item. So
check the card's return policy.
ATM and debit transactions need to be recorded immediately
to keep from losing track of your balance.
Automatic deduction
These nifty payment plans can save you time and
stamps because they pre-authorize monthly debits of bill payments
for such regular expenses as gym memberships, student loans and
car payments. You are letting the bank do the paperwork to pay your
bills. However, automatic deductions are not without their problems,
says Edward Mrkvicka Jr., author of Your
Bank is Ripping You Off.
For example, a monthly debit from your account may
continue for a gym membership you canceled three months ago. So
be sure to stay on top of all deductions, note them in your checkbook
and contact the bank if there are any discrepancies.
Overdraft protection
You can forever avoid the rubber check blues
by signing up for overdraft protection. When you write a check for
more than the balance in your account, money can be automatically
withdrawn from your savings or money market account to cover the
amount.
Some financial institutions charge a fee to transfer
funds from one account to another. Yet, Mrkvicka says, there are
ways to avoid the fees of this coverage.
"You can get the same service for nothing if you ask
for a red flag. That means if you're account is overdrawn, someone
will pick up the phone to tell you that you have until the end of
the business day to make a deposit."
Lost checkbook
Failing to notify the bank immediately that your
checkbook or debit card was lost or stolen can result in losing
all of your money.
Issue a stop payment on checks numbered after the
last check you wrote. Some financial institutions limit your liability
at $50 for a lost debit card. That limit, though, could increase
the longer you wait to report the loss.
The best preventive measure to take is keeping fastidious
records of all your financial transactions. Think about it, you
may never have to venture into rubber-check city again.
-- Updated: June 10, 2003
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