Money To Live

July 31, 2008

Defining Moments: Katy bounces a check

Filed under: banks,defining moments — by moneytolive @ 5:00 am
Tags: ,

Defining Moments is a series about how we remember money and how it has shaped our lives.

At the end of my first year of graduate school, I stayed in the dorm one extra week before leaving for the summer, and for this I owed the housing office $110. I wrote a check to the housing office, withdrew all the cash from my checking account, and hit the road.

When I got back in the fall, there were three important letters in my departmental mailbox:

Credit Union: notice of a bounced check

Housing Office: first notice of unpaid housing bill

Housing Office: second notice of unpaid housing bill

My stomach in knots, tears welling in my eyes, I called the housing office. The receptionist told me not to worry and to pay whenever I had the money. She must have heard the worry in my voice. Or maybe she thought I was a humanities grad student.

Next I called the credit union expecting the worst: a bounced check fee, overdrawn account fee, late repayment fee, etc. The credit union, however, said there was no charge!

This is what I learned:

I was lucky. In college a friend was hit with nearly $100 in fees after overdrawing her checking account. The Federal Reserve estimates that an overdraft of $80 could lead to $75 in fees.

Obviously, be more careful when closing an account. Wait a few months before withdrawing the balance to make sure all outstanding checks have cleared the account.

Credit unions are awesome. Credit unions are not-for-profit, which enables them to offer high interest rates for savings accounts and low interest rates on loans. Also, they are not looking to make a profit off a customer’s mistake. Find one near you.

If you are hit with overdraft fees, there are a few things you can do.

Request that the fees be waived. Though this may or may not work (it often work with credit card fees), it is good practice to ask for extra fees to be reduced or removed.

Consider making a link to a savings account or switching to a bank that allows you to link to a savings account.

Write to your representative in congress asking for support of fair overdraft protection programs.

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