Balancing your checkbook each month can save you money. Overdrawing your checking account is getting more and more expensive. When a check is submitted for payment at the grocery store and there isn’t enough money in the account to cover it, you will be charged fees by both the financial institution and the grocery store.

Paper checks no longer represent the largest portion of overdrafts. According to research by the Center for Responsible Lending, about 46 percent of all overdrafts are triggered by debit card point-of-sale transactions or ATM withdrawals. Paper checks represent only 27 percent of overdrafts.

Using debit cards help

Using a debit card instead of a check will save you the fee charged by the grocery store. However, the bank will still charge for the overdrawn transaction. If you overdraw your account more than once in any 12-month period, you may pay even more.

According to Bankrate.com (2009), the average fee for a bounced check or debit transaction is $29.58. Overdraw your account a second time within 12-months and many banks (26 percent) charge a higher rate (on average $33.88). Some banks (less than 20 percent) charge even more (on average $36.19) for additional overdrafts in the same 12-month period.

University of Georgia Cooperative Extension financial experts say the best advice is to avoid writing bad checks by staying on top of your account balance. Use a checkbook register, record all transactions, and reconcile the account online or with a statement provided by your financial institution. Never write checks or use your debit card when you do not have the money in your account to cover the transactions.

There are several options available to minimize the risk of overdrafts from checks, debit, or ATM transactions. When an account is opened, banks typically promote the most expensive option. Unless you specified otherwise, you were probably automatically enrolled in a so-called courtesy overdraft program.

Overdraft protection not best option

With courtesy overdraft protection, your financial institution pays the check and charges you for the overdraft. You avoid the returned check fee that would have been charged by the retailer. However, this option encourages you to overdraw your account.

When you call your financial institution or use an ATM to determine your “available balance,” the amount may exceed your actual account balance by as much as $500 or more. If you expect a debit transaction to be declined if your account balance drops to zero, think again. The additional “available balance” means that when you use your debit card at a point-of-sale terminal or ATM, the transaction will not be declined when your account balance reaches zero.

A better option is to link your checking account to a savings account at the same institution. If you overdraw your account, money will be transferred from your savings account to cover any overdrafts. In some instances the financial institution will transfer the exact amount needed. Or, the bank may only make transfers in $100 increments. A transaction fee may also be charged for the transfer.

Link your accounts

Another option is to link your checking or share draft account to either a credit card or a line of credit from your financial institution. Again, the amount you receive when an overdraft is presented can vary from the exact amount needed to bring the balance to zero to $100 or more, depending upon the terms of the agreement. Transaction fees may also apply and you will likely pay interest on the loan.

Check with your financial institution today to develop a plan for handling overdrafts. If you have not made arrangements for overdrafts, sign up for the option that is more cost-effective than the “free” loan from your financial institution.

For more financial advice from UGA Extension, go to the website www.fcs.uga.edu/ext/econ/.