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Overdraft Debt Protection With A Credit Line

As much as we try to avoid it, it's a fact of life: overdrawing on your checking account happens, and if it hasn't happened to you yet, you may want to brace yourself. If you have a joint account which allows your spouse to make deposits and withdrawals as well, it is almost impossible to avoid. The results of becoming "overdrawn", however, are not pretty. Starting out, you can have a transaction declined, or worse, have your check bounce, receive a letter from your bank and get charged with a nasty charge($20+ in some cases) for letting your account go NSF (non sufficient funds). What's worse is that many vendors will charge you an NSF fee on top of the fee your bank already charged you as an administration fee. And let's just quickly mention that some companies may charge a "late payment fee" if you for some reason cannot deliver a new check on their terms. Whatever the case, being overdrawn is brutal. But, it can be avoided.


A Credit Line - Big Help When The Chips Are Down

Although we at Debt Consolidation Advisors rarely suggest applying for more credit (after all, most of our clients find us because they are having problems), there is one form which we can certainly recommend: the personal line of credit. These are simple to apply for at your local bank, and can save you lots of money in the future. Once you apply, your lender or bank simply reviews the application and if you qualify (homeowners generally do), you will be approved for a certain amount. Be aware that if the amount sounds high, there is no need to accept it all. You can instruct your banker to lower your credit line, if only to ensure you don't "overdo things".


Once you have applied for and are accepted for a personal credit line, you can have this line automatically attached to your checking account. While most banks do offer an "overdraft", what they do not tell you is that typically this overdraft charges interest rates that are closer to than you might think to that of an average credit card. Meanwhile, personal credit lines typically boast rates as low as prime or prime +1. So having the personal credit line is definitely the way to go.


Once attached to your checking account, your personal line of credit acts just like an overdraft: as in, if you withdraw funds that are "not there", it automatically saves you from the dreaded NSF process. This only works up until your limit of course, but is a superb, inexpensive safety net for your checking account.


Always Shop Around!

One important note: when looking for a personal credit line, or any banking product for that matter, never be afraid to shop around. Some banks will take advantage of their customers and charge fees to draw on personal credit lines or boost the rate higher than their competitors. You do not have to take this! There are many banks out there that will gladly do better than your current bank, so never be afraid to drive a hard bargain.


A final, excellent advantage of personal lines of credit is that they are not only a cheap way to hold an overdraft balance, but also act as an emergency savings account. Although it can never replace having an emergency fund ready in case of the unexpected, it doesn't hurt to have the ability to draw a little money when times are tight.


Having issues with debt? Contact us here for a free debt consolidation consultation. We may be able to provide you with debt help.

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