Checking Accounts with Bounce Protection

Having a checking account is a necessary requirement for anyone who wants to live a normal life in this shopping-oriented society of ours. Who doesn’t think that life would be a bit easier with a checking account? After all, with an account, you have the ability to write checks and to use a debit and credit card linked to your account. You can also gain access to a nationwide network of ATM machines, giving you access to your cash no matter where you go.

One reason that some people put off opening a checking account is that they are concerned about having a check or debit card transaction bounce. And, this concern is justified. After all, overdraft fees are a big business for banks. In 2006, banks earned over $25 billion in overdraft fees in the U.S. alone.

People looking to open a new bank account often look for checking accounts with bounce protection. These accounts have overdraft protection programs in place. Here is how overdraft protection programs work:

1. The customer has a certain amount in the checking account, say $100.
2. The customer does his or her best to not make any charges against the account that are larger than this current balance amount.
3. One day, however, the customer misjudges the current balance and makes three charges against the account: one for $45, one for $60, and one for $5.
4. The first charge of $45 is fine, but the $60 charge puts the account into a negative balance, and the $5 charge also hits the account when it is “in the red.” The result: the bank covers all three of the charges, due to the fact that the overdraft protection program is in place for this customer. This is an advantage on the one hand, because it means that the vendors to whom the customer promised the payments will get paid on time.
5. However, given that the bank honored the two charges that caused the account to have a negative balance, the bank also charges the customer an overdraft fee. This fee can range, but is usually in the $25 to $35 range per charge. If the fee is $35, in the example above, the customer would have to pay ($35 x 2 =) $70 in overdraft fees!

As we can see, checking accounts with bounce protection have their pluses and minuses. Is bounce protection a good thing? Yes, they are good in that they cover outstanding charges. But, the fact that they charge such high fees makes them very expensive.

The very best checking accounts are those that offer bounce protection but do not charge a fee. Yes, surprisingly, there are banks that offer bounce (overdraft) protection without charging a fee. These banks charge a low monthly fee which is far less than what the average person pays in overdraft fees per month.

A final note: have you been rejected recently for a new checking account? Your name may have been reported by a bank to something called Chex Systems, a service that banks use to evaluate credit risk levels for prospective checking account holders. Fortunately, some banks now offer second chance checking accounts. These banks promise to never refer to Chex Systems when making decisions on a new account holder, increasing the likelihood of acceptance. For more on this option, check out: http://www.squidoo.com/open-second-chance-checking-account-online.