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Overdraft FeesOverdraft occurs when an account does not have sufficient funds to cover a check that is written. This is referred to as nonsufficient funds (NSF). Banks will charge an expensive fee everytime a NSF transaction occurs. Fees can range from $20 to $35 at some banks for NSF.
Banks have rules in dealing with checks and nonsufficient funds. Suppose you had $100 and wrote 4 checks. The 4 checks are for $90, $50, $20, $15. As you can see, the 4 checks total $175 while you only had $100 in the checking account. Some banks will charge you 3 NSF separate fees because the $90 was deemed more important, so it was cleared first. After the $90 check cleared, your bank account now only has $10, making the other 3 checks you wrote to bounce. This causes the NSF to kick in each time the other 3 checks are attempted to be cleared.
Suppose the $50, $20 and $15 checks were cleared first. Now your bank will only charge you one NSF fee. If the checks were attempted to be cleared at close to the same time, most banks will clear the larger account first. They believe the larger amount is more important than the lower amount checks.
Protecting Yourself From OverdraftPeople with multiple bank accounts at the same bank are able to qualify for overdraft protection that banks typically automatically enroll their customers in. You will still be charged the NSF fee, but instead of the checking bouncing, the money will be deducted from another account you have at the bank, such as a savings account. Banks usually limit the overdraft limit to $1,000.
To qualify for overdraft protection, your two accounts need to be linked together. Nowadays, most banks have online access available to help keep their customers aware of their balances. Banks also have toll-free numbers available to call in and request your account balances to help prevent you from writing checks for more than your account balance.