Most banking customers are unwittingly enrolled in their bank’s overdraft loan program which costs on average about $34 per overdraft occurrence. What this means is that if you mistakenly overdraft your checking account while purchasing coffee for $3 you will be charged $3 plus a $34 fee by the bank to cover the transaction. But there are cheaper alternatives.

Linked Savings Account – This program allows the bank to access your savings account when you overdraft your checking account, often for a nominal fee.

Linked Line of Credit/Credit Card – This program allows the bank to cover overdrafts of your checking account with your line of credit, such as a credit card. You will need to secure this line of credit through your bank. This option usually has an annual fee; but is much cheaper than the bank’s overdraft loan program.

Reject Purchase – You can also request that your bank decline any purchase that causes you to overdraft your account. Beware the merchant may charge you a bounced check fee.

(sources: http://www.federalreserve.gov/pubs/bounce/ and http://www.responsiblelending.org/issues/overdraft/)

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