Banks often offer overdraft protection to shield you from overdraft fees. However, these fees can quickly add up, especially if you don’t check your balance before purchasing.
If overdraft protection is a good idea, read your bank’s terms and conditions. Then, decide whether the service is worth the price.
Expenses That Can’t Be Foreseen
There are always surprises, whether you’re an established small business or just starting. Some are good, some are bad, and many are financial.
Several types of expenses fall into the category of “unexpected.” These include
unforeseen repairs on your company’s equipment, large deductibles in your medical insurance plan, and costs associated with losing your home or car.
Additionally, understanding overdraft protection is quite essential. If the account balance falls below zero, overdraft protection ensures that a check, ATM, wire transfer, or debit card transaction will be processed successfully. Depending on the type of linked account used, significant fees and interest may be associated with overdraft protection.
The savviest budgeters don’t anticipate these costs, but they’re still a big deal. They can lead to a significant drain on your bottom line, so saving for them is essential.
List all your irregular and overlooked expenses to ensure you’re prepared for the
unexpected. Then, build a savings strategy for each to ensure you’re always aware of the situation. The best way to do this is by making a monthly budget and tracking your spending. Then, set aside enough money each week to cover these unforeseen expenses.
Unexpected Expenses
Whether fixing a leaky roof, buying a new car, or paying large medical bills,
unexpected expenses can be stressful. They can feel overwhelming if you still need to save for these emergencies.
But there are some ways to manage these unexpected costs, even when you’re on a tight budget. First, you should avoid spending too much money in one go.
You can also monitor your checking account balance by signing up for text or email alerts. These notifications will let you know when you’re about to overdraw your account.
Some banks offer Overdraft Protection, which allows you to fund your transactions even if you don’t have enough money in your account. Some banks offer this service automatically, while others require you to opt-in.
Unexpected Income
When you receive an unexpected windfall — like a bonus, tax refund, or even a birthday or graduation check — it’s easy to get caught up in the excitement. However, it’s essential to consider your financial goals and how to use the money responsibly.
For example, you may use the money to pay down debts and credit cards or put it toward new assets. You may also save it for a future goal, such as a family vacation or buying a home.
Overdraft protection is a service that helps you avoid fees when your checking account runs out of funds to cover a transaction. It automatically transfers funds
from a linked backup source such as another bank account, a credit card, or a line of credit to cover the shortfall.
Embarrassment
One of the most embarrassment-causing events a business can experience is having a debit card declined, or a check bounced. Overdraft protection, while not always available to every customer, is a feature that some banks offer to help reduce the
number of costly mishaps.
Overdraft protection is a fee-based service that allows the account holder to access a short-term loan from the bank in case of an overdrawn balance. Most banks have an online overdraft fee calculator that determines which of the many options they offer suits your situation best. Another option is to link your checking account to a credit card or savings account with a built-in overdraft protection feature. You can even have your bank send you alerts by email or text when you are in the red. A
well-thought-out overdraft strategy will go a long way toward keeping your business cash flowing smoothly and on track.
