Broke Ass Financial Coaching: Overdrafts and Other Bank BS pt. 2

While being young, broke and beautiful is all well and good, some people’s finances are more jacked than others.  That’s why we’ve invited Betsy Crouch (aka Coach $izzle) to come onboard and dole out some much needed advice.  She is a professional financial coach after all.  If you’ve got a question you’d like answered please email her atcoachsizzle@brokeassstuart.com.  Maybe your question will be the next one answered.

Continued…from PART 1

So until we figure out a surefire way to bust out of the system.  Get additional overdraft protection beyond their “huge fee” and “automatic” version.

There are three common types of overdraft protection besides the “automatic” one banks normally offer.

1.  Overdraft line of credit – most preferable.  www.ingdirect.com does not charge overdraft charges, they have thousands of atms and if you qualify for the account then you automatically qualify for an overdraft line of credit that merely charges you a reasonable interest rate on the amount you overdraft instead of something crazy and unreasonable.

2.  Set up a savings account and link the checking to the savings account, if you overdraft they will dip into the savings to cover the charge.  This is usually problematic because many banks pay little interest on savings accounts.   Research banks checking and savings account fees, www.bankrate.com.

3.  Link your checking account to a credit card. There is usually still an overdraft fee, around $10, and if you are carrying a balance consider the interest rate.

Of these options I would rank overdraft line of credit #1 for sure and then #2 and #3 are not ideal but better than nothing.

Back to the should I set up “automatic” bill pay question:
Originate any electronic or automatic payments FROM your checking account versus giving your debit card information to vendors
Let’s say you are organized.  I would NOT recommend setting up payments to companies by giving the company your debit card information.

What you are doing is giving the company access to YOUR money.  So say you are paying Mr. Smith for a product or service and you say, “hey Mr. Smith, yeah, whenever you feel like I owe you money, just stick your hand directly into my account and take whatever you feel I owe you, sound good?”  Whoa Whoa Whoa.

I have a client who canceled phone lines and the phone company charged/took over $1000 out of his checking account because he had giving them access to charge his debit card automatically. In addition to the surprise charge, it caused his account to overdraft resulting in 4 overdraft charges.  So, let’s say Mr. Smith takes an amount that you disagree with.  Well he has already taken it and it may be challenging to get it back.  If you didn’t give automatic access to your account then you could receive the bill and challenge the total, fix the problem, or negotiate.

Coach sizzle recommends:
1.  Set up your online bill pay through your checking account.
2.  If you set up automatic payments from your checking account to pay bills, enter them in your checkbook and keep them in mind when you balance your checkbook to avoid overdraft charges.
3.  Balance on a credit card? To protect your credit score and your credit card interest rate, set up an automatic payment from your checking account to your credit card of an amount a few dollars more than the minimum.
4.  If you insist on giving out your debit card information for automatic charges, make sure you are agreeing to a set total per month as well as only do this with companies who you trust.

Your money is hard earned.  Be powerful, protect it.

Please let me know if you would like to opt out of overdraft protection.  Also, what do you think of all this?  coachsizzle@brokeassstuart.com