What to Know About Business Overdrafts
Business overdrafts can be both good and bad. It really comes down to how you look at it. Since banks are obviously in it for the money, I wanted to really showcase what a business overdraft can do for you and if it is really worth it for you and your businesses.
What is a business overdraft?
An overdraft is basically a line of credit that is going to protect you from any overdrafts that may occur on your account. For example, let’s say that you have $150 in your bank account and you write a check for $165. Since you don’t have enough funds, you’re going to be “overdrafting” your account.
When you do something like this, the banks are going to start charging fees for every transaction that you make. This is why its important that you should consider this type of protection.
Now, if you’re good at managing your budget, then you’re probably going to have nothing to worry about since you will never fall below the $0 balance line in your account.
What does overdraft protection do for my business?
Its going to give you the peace of mind that you know that you’re never going to get charged an overdraft fee when you have it implemented with your account. It will be great for those that don’t really have time to manage / budget their account and come close to that $0 boundary.
Its also going to save you money. If you have one overdraft fee, it can easily run you $35 per transaction. If you even have 5 $1 transactions, that can be 5 x $35, giving you a whopping total of $175 for 5 $1 transactions. Do you see where I’m going here?
How much does something like this cost?
All banks are going to vary in their pricing. Most of them want you to head into a branch so that they can talk you into signing up. While some will want you to have a savings that they can tie in, you will want to compare a few banks to see how others work. Don’t feel as if you’re tied down to your bank because there may always be better out there.
In the long run, it may be worth it depending on the fees. You’re really going to have to do your homework on it. If you’re good with your budget, I wouldn’t worry about it. If you have experienced an overdraft before, then you may want to consider it.
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