Avoiding Checking Overdrafts
Keep an eye on your balance and eliminate Checking overdraft fees
Most DCU members never overdraft their DCU checking accounts and never pay overdraft fees. Learn their secrets below and you can avoid these fees, too.
What is an overdraft?
Simply put, an overdraft is when you don’t have enough money in your checking account to cover charges against it. These charges could be personal checks, debit card purchases, Bill Payer transactions, or ACH pre-authorized payments such as utility or insurance bills. ATM withdrawals and PIN-based card purchase transactions cannot directly cause an overdraft.
Are overdrafts bad? Yes.
Most overdrafts are honest mistakes or indications of a cash flow problem. Intentionally writing checks without funds behind them is considered check fraud. Even when it happens by mistake, it can create a significant amount of extra work in the banking system to resolve the transaction.
Overdrafts can be a sign of potential financial difficulties, too. DCU offers resources to assist members including the BALANCE Financial Fitness Program.
Institutions charge penalty fees for people that overdraft their accounts. To discourage this behavior and recover the cost of extra processing and collections efforts that overdrafts require, DCU charges $30 if an item is returned, $30 if an item is paid by overdrawing the account, and $5 to pay an item via a tranfer from your Savings Acount, Visa® Credit Card Loan, or Home Equity Line of Credit.
If overdrafts get excessive, an institution may close the checking account and report the closure to credit bureaus. A history of checking account abuse can prevent an individual from obtaining another checking account and negatively affect your credit rating. Merchants also charge fees when paid with a bad check.
How do you prevent overdrafts? Actively manage the balance in your account.
Here’s what many members do...
- Record all check card purchases, checks, Bill Payer transactions, deposits, credits, transfers, and ATM withdrawals in your check register. Do this as soon as you initiate the transaction if it's a withdrawal (i.e. as soon as you write the check, use your debit card, etc), or as soon as the transaction actually occurs if it's a deposit.
- Remember to subtract any ACH preauthorized bill payments you may have set up for loans, utilities, or insurance. Do this a few days in advance of the scheduled payment to ensure the money is in your account on payment day.
- To cover potential mistakes, keep a cash cushion in your account. An amount equal to at least one week’s typical bills is a good rule of thumb if possible.
- Review your electronic account statement promptly each month and verify the entries in your check register. You can check your account balance online with PC Branch. Balance your account regularly.
- Set up a Balance is Less Than Notification in PC Branch. Pick a minimum safety balance and it will send you an email if your balance drops below that amount.
- Above all, make sure you have enough money in the account to cover your transactions before you make them. You can replenish your checking account before your transactions with deposits, a transfer from another DCU savings or checking account, or a line-of-credit advance from your Visa Credit Card or Home Equity Line of Credit. You can do any of these things remotely 24 hours a day, at no cost.
Remember that your balance in PC Branch only reflects transactions that have cleared your account up to that moment. Checks and debit card purchases that have not cleared and ACH withdrawals scheduled to occur in the next few days are not reflected in that balance.
Does DCU offer protection against occasional mistakes? Yes.
Even if you consider yourself a conscientious person, there may be a rare occasion when you write a check and discover that there isn’t enough money in your account to cover it. Numbers may get transposed when you enter a deposit in your check register, or a fast-food debit purchase that didn’t come with a receipt could push your balance lower than expected. And as more and more checks are being processed electronically (Check 21) checks clear more quickly than in the past.
For your protection, you should link your checking account to another DCU account that provides protection against returned items or overdrafts. If you have sufficient funds available, your overdraft will be honored and you won’t be subject to the embarrassment and merchant fees that could be caused if one of your checks bounces.
DCU has multiple options to protect your checking account from overdrafts...
- DCU "I'm Covered" Overdraft Payment Service. "I'm Covered" covers qualifying members for overdrafts by check, check card, and ACH of up to $1,500 at any one time. This helps avoid the embarrassment and expense of a returned item or rejected debit card transaction. There is no maintenance or annual fee to have this valuable protection. It's only when the service is used that a fee will be charged (and that fee is the same amount that would be charged if the item were returned however, in this case, the item is paid.)
To obtain this valuable coverage log into PC Branch and complete the Secure Form or call our Information Center at 508.263.6700 or 800.328.8797, see if you qualify and say yes to Opt-in. - "I'm Covered" Disclosure.
- "I'm Covered" Disclosure for multiple Checking Accounts.
Overdraft Protection from a Line of Credit Loan:
- DCU Visa® Credit Card Overdraft Protection. If you’re a DCU Visa cardholder, you can sign up for optional overdraft protection for your DCU Checking Account. If your checking account balance ever falls into a negative zone, the overdraft amount is automatically charged to your Visa as a cash advance, up to your available credit limit. The cost per occurrence is $5.
- Home Equity Line of Credit. Equity LinePLUS offers you yet another way to protect your checking account. Same as with Visa, if your checking account balance ever falls into a negative zone, the overdraft amount is automatically charged to your equity line as a loan advance. The cost is $5 per occurrence.
- Limited Overdraft Protection from Savings. Your DCU Savings Account can kick in to cover an overdraft against your checking account (maximum of six times per month in combination with other Federal Reserve Regulation D transactions). If you choose this overdraft protection option, funds are automatically transferred from your savings to your checking account at $5.00 per occurrence.
Overdraft protection advances from ACL accounts (no longer available) are also $5.00 per occurrence.
You can utilize one, two, or all three of these options to protect your account. You can also tell us in what order to access these services if you do have an overdraft. We call this the "overdraft path". To summarize, with minimal effort and some easy–to–use tools, you'll likely never pay another overdraft fee because you'll never overdraft your checking account again. But if you do, DCU provides a number of options to help minimize the impact.
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Digital Federal Credit Union
220 Donald Lynch Boulevard PO Box 9130 Marlborough, MA 01752-9130 508.263.6700 • 800.328.8797 |
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