Find Good Overdraft Protection

Instead of incurring unauthorized overdraft loans which are very expensive, ask your bank to enroll you in a safe overdraft protection program.  If you opened your account after August of 2010, your bank must get your permission to enroll you in overdraft "protection."  If they ask if you want this protection, JUST SAY NO!

Below are safer options for covering your overdrafts.  Ask your bank about these. 

• Line of Credit:  One option is a program where a line of credit kicks in if you overdraw your checking account.  This type of protection is very inexpensive when compared to an unauthorized overdraft loan.  The interest rates might range from 10% to 20% (whereas interest rates on unauthorized overdraft loans can be as high as 52,000%). 

• Savings Account:  If you have a savings account, another option is for the bank to cover overdrafts automatically from your savings at little or no charge.

Consider a Short-term Loan:  If you are consistently overdrawing your checking account and need a small loan for short-term expenses, you should consider shopping around for a small loan from a bank or credit union.  A fairly priced small loan is a much better option than an ongoing cascade of unauthorized overdraft loans. 

Find a Good Short-term Loan

If you decide to look for a small loan, ask these basic questions when you shop around.  Remember, the best source of  a small loan is a bank or credit union.  Avoid payday loans, car title loans, refund anticipation loans, and overdraft loans.

1. What is the total amount of the loan, including the interest and fees?

2. What is the interest rate?  What is the annual percentage rate?

3. How much are the fees for getting the loan or product?

4. What is the loan term (how long will it take to repay)?

5. What are the penalties if the loan is not repaid in the time period?  Does the interest rate increase?  Are there additional fees?

6. How often will you make payments?  Can you fit them into your budget?

7. Are you paying for services or options that you don’t need?

8. Do you really need the money or product that badly, right now?  Small loans are expensive and can trap you in a cycle of debt.

9. If you’re shopping outside of a bank or credit union, ask what security is required to get a small loan.  Are you asked to write a check for the lender to hold, to sign over electronic access to your bank account, or to sign over the title to your car?  If you give security for a loan, you risk losing it and racking up extra fees if you are unable to repay on time.

For more tips about making ends meet and finding a good small loan, visit http://www.paydayloaninfo.org/consumer.asp, provided by the Consumer Federation of America.