It can happen to any one at any time -- the check that is sent back because you had insufficient funds in your checking account.
How does it happen? How do we write bad checks?
"Really, the most common mistakes that we see is that people don't keep track of the balance in their account. The easy solution to that is to participate in on line banking with your local bank,” said David Hudson of Central Pacific Bank.
It's a two step process, really. The first is to make sure the money you have coming in gets to where it belongs.
"One is simply to have automatic credits coming into your account, whether it's your payroll, your pension, your social security - if those moneys are coming in automatically, you don't have to worry about getting down to the bank and making those deposit,” said Hudson.
Along with on line banking, financial institutions also offer balance alerts.
"So they have alerts for transactions that are processed in your account. The most important one is really the minimum balance alert. So you set a target, whatever is comfortable for you and then the bank will send you an e-mail,” said Hudson.
There are a couple of ways to avoid overdraft penalties. One is to ask your bank to set up a special connection between a savings and a checking account.
"Where money from your savings account is swept to your checking account to prevent overdrafts from occurring. That's typically much, much cheaper than the overdraft fees that you would normally pay. The other is to establish an overdraft line of credit,” said Hudson.
There is another choice. You can ask the bank for overdraft insurance. It's different than normal types of insurance.
"You only pay for it when you use it, unlike your automobile insurance where you pay for it whether you get into an accident or not,” said Hudson.
If you have a financial question for our experts, email us at dollarsandsense@khon2.com.
