The Down and Dirty of Overdrafting

In our last article we touched on the fact that you can take out a payday loan to avoid overdrafting on a checking account, because banks usually charge more than a reliable payday loan lender. We thought we’d explore this topic a little further.

Overdrafting is a fairly simple concept. It happens when you write a check for, withdraw or debit more money than your available balance in your checking account. It happens to many people. You’re busy running around taking care of your life, paying bills, buying groceries and putting gas in your car, all the while not paying close attention to your balance. Then, you get your account statement only to find a hefty fee staring you in the face.

Many banks charge as much as $40 every time you overdraw your account. This is regardless of the amount of the transaction, so you might end up paying over $40 for a $4 gallon of milk. In fact, banks collected $38.5 billion in debit-card overdraft fees in 2009, according to Moebs Services, an economic research firm.

Because of a law that went into effect this summer, you must opt in to your bank’s overdraft protection program. If you don’t, your transaction will be declined when you are about to overdraft. If you opt in, you will still be slapped with those hefty fees.

We want you to know there are ways of avoiding this situation. The simplest and easiest way is to keep track of all your transactions in an old-fashioned check register. We know it might seem tedious, but it’s a tried and true way of keeping track of your expenses. It also gives you an up-close view of all of your purchases, so you have a better idea of where your money is going.

If this simply seems too tiresome for you, you can also religiously check your bank account balance online, but we mean religiously! If you’re already a serial overdrafter, you need to be sure to take a moment to look at your account balance every night, think through the purchases you plan to make the next day and make sure they will not amount to more than your available balance.

There is a separate option if you have a savings account with a decent balance. Some banks offer overdraft protection where a savings account is used as a backup for your checking account. You are still charged, but the fees are usually in the $5-$10 range.

We know that life can be chaotic and sometimes you just don’t have time to plan ahead or keep track of all of your transactions. In the worst case scenario that you’ve written a check that is going to bounce, and you don’t have a savings account to draw from, you always have the option of taking out a payday loan. The fees are usually significantly lower than what your bank will charge for an overdraft. Don’t be afraid to take this option if you need money to pay for necessities like prescriptions and food, and you’re about to overdraft your account anyway. Just be sure to plan ahead the next time, try to work within your budget and always keep track of your balance.

Car Title Loans

There are many different types of short-term loans that you can take advantage of in order to get out of a financial rough spot. We all have times when we’re tight on cash and many of us have less than desirable credit scores these days. This is when short-term loans can be helpful. Today, we want to share another loan option with you: the car title loan.

A car title loan is simply a loan where you provide your car title as collateral for the loan. Interest rates may be higher than a traditional loan, because lenders usually don’t check your credit, nor do they perform extensive income verification. For many, this is the appeal of the loan. If your stats aren’t great on paper, but you will be able to pay the money back on time, this might be the option for you.

Like a payday loan, car title loans are only meant for financial emergencies. After all, this is your car we are talking about! The relative daily importance of your car might vary depending on where you live and what you do for a living. For instance, if you live in Los Angeles and you need your car to drive to the office every day, you may not want to borrow against it. On the other hand, if you live in New York and take the subway to work most days, borrowing against your car may not be such a big risk. Even if you have the latter situation, you still only want to take out a car title loan if you are truly in a financial crisis.

If you are going to default on your rent check, or you have a sudden medical emergency, and you don’t have the credit to get a traditional loan, a car title loan from a trustworthy lender may be the best option for you. As we mentioned before, be sure evaluate your priorities and needs before taking out one of these loans. No concert ticket, Louis Vuitton bag or last-minute trip to Vegas can justify risking your wheels.