The electric bill is due, you need to get groceries and the car is almost out of gas. A look at your checking account balance shows that there is not enough money to cover those expenses. You can skip the electric bill and pay it later, but it will cost you a late fee.
You can’t go without food or gas but you do have options. Some people choose to go into overdraft on their checking accounts whilst others choose payday loans or online loans as a way to take care of the money needed in between paychecks. How do you know which option is best for you?
Overdraft fees happen when you have spent more money than you actually have in your checking account. It could be that you lost track of how much you spent or a check cleared before you thought it would.
If you have a checking account, you want to have overdraft protection for those times when you accidentally spend more money than you have in your account. When you sign up for the checking account or at a later time you can go in, fill out paperwork and get an overdraft line of credit.
This means that your charges will be covered and you can avoid the overdraft fee. However, in most cases, there is still a fee when you go into this line of credit. It is usually much less and doesn’t always happen with each charge. Once you go over, you are over.
You can consider having your checking account linked to a savings account. In this case, you will use your own funds to cover the expenses.
Check with your bank to see if this option is available and how much, if any of the charges, will go into the savings account money.
Payday and online loans give you the opportunity to take out a certain amount of money, in cash or deposited into your checking account in order to pay the bills and commitments that you need to take care of.
There is usually a fee for borrowing the money. This fee will be added to the amount of money that you need to pay back.
You will also have charges based on the time you pay the money back. The longer it takes you to pay the money back, the more “interest” you will be charged. Most of the time, these charges are a percentage of the total amount you borrowed.
This can be cost effective if you figure out the amount you need, borrow it and pay it back immediately. If you pay the money back quickly, you can avoid more charges.
As with the example in the beginning, if you need to pay for the electricity, some groceries and gas for your vehicle, you can take out all of the money you need at one time.
There is a user fee but if you pay the money back quickly, you can keep the fees down.
Remember with overdraft fees, you pay each time that you overdraw your account.
Each individual and family is different, so look at the current fees at your bank versus online loans or payday loans to see which is best.