Protecting Checking Account With a Personal Line of Credit

Unfortunately, many of us have shared the unpleasant experience of overdrawing our checking account. This can happen for a wide variety of reasons. Perhaps a spouse made a withdrawal that you were not aware of, or maybe you committed a small mathematical error while balancing the checkbook. For whatever the reason, an overdrawn account inevitably produces some negative consequences. For starters, it can be quite embarrassing if a transaction is declined or if you receive a letter from your bank declaring your account has "non sufficient funds". Additionally, your bank will charge you a penalty fee for each NSF check that was written. An individual also runs the risk of incurring a NSF fee from a creditor if a payment check ends up being declined. You also may receive a late penalty if a new check can not be delivered in time. However, these consequences can all be prevented through the use of a personal line of credit.

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An individual can apply for a personal line of credit to be attached to their checking account. The lender will review the application and (if qualified) approve the credit line for a set amount. If an individual attempts to access funds that are not currently available in his account then the personal line of credit will automatically provide the requested amount, up to the designated limit. This will greatly reduce the chance of bouncing any additional checks. It is important to note that the cost of having a credit line will vary between lenders. It is common to be charged a nominal annual fee, as well as, a small fee whenever the line of credit is used. There are no fees charged on the credit itself as long as it is never accessed.

A personal credit line offers a wonderful means of overdraft protection. It is a convenient and cost efficient way to ensure that your checks will all be accepted. It not only prevents the embarrassment and fees associated with accidentally overdrawing your account but it also provides an emergency line of credit. These funds can be intentionally accessed in the case that emergency funds are needed. These funds are generally offered at a significantly lower rate than an average credit card.

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About the author:

Mark Carney is a professional consultant with First American Debt Consolidation and Loans, a debt consolidation service specializing in financial education, credit counseling, and debt management services nationwide.