By John Campbell

You need to watch out for debit card overdrafts. They could cost you a lot more than you’re prepared to pay.

An overdraft occurs when you don’t have enough money in your account to cover a check or debit card transaction when it posts to your attached bank account. With checks, an overdraft could result in a bounced check if you don’t have overdraft protection. You’ll likely be responsible for paying a penalty fee to cover any check returned due to lack of funds and could even face criminal prosecution in a worst case scenario.

Debit cards without overdraft protection are functionally similar to credit cards with a set credit limit. If any transaction goes over your credit limit or the amount of available funds in your attached bank account the transaction may be declined from the point-of-sale. Many debit cards today have automatic overdraft protection so you may not have to worry about any transaction being declined due of insufficient funds. You’ll probably pay a hefty price for this overdraft protection, however.

With overdraft protection on a debit card, you may be responsible for paying up to a $30 charge for each and every transaction over the available funds in your bank account. Even if you overdraw your account by pennies, you’ll automatically have overdraft charges added to your now negative balance. If you aren’t aware that your bank account has been overdrawn you could rack up hundreds of dollars in overdraft fees in just a day of regular debit card use. Buy groceries, get gas and make a trip to your favorite hobby shop and you could end up with $90 in overdraft charges alone.

The best way to ensure you won’t overdraw your bank account is to balance your checkbook after every transaction. You should always record every pending debit card transaction and check written, even if the funds have not yet been withdrawn from your account. Ideally, you should have enough funds in your bank account to cover all current or pending transactions. If you have a pending transaction for $250 that will soon be processed you don’t want to leave any less than $250 in your account until after the transaction clears.

Balancing your checkbook will help you keep your finances up to date. You should also check your bank account on the Web at least once a day if you have online bank account access. That way you can confirm any completed or pending transactions to your account on a daily basis and correct any errors that may crop up.

If worse comes to worse and you do end up overdrawing your account, call your bank and explain your situation. If you can reasonably show that an item posted to your account ahead of schedule or that the overdraft was just barely over your available funds you may be pleasantly surprised at how willing many banks will be to waive some or even all of your overdraft fees. After all, you are a customer and banks usually want to keep their customers happy.

As long as you can keep track of every debit card transaction you should be able to avoid most debit card overdrafts altogether. Fail to do so and you could quickly drain your bank account before you even know what hit you.

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John Campbell is the writer and editor of CashBuzz, A financial portal for the rest of us. Check out cashbuzz.com for the latest articles on money management and tips and tricks that can help improve your finances. This article may be reprinted on your Web site if the copyright, author information and active link are included.