Using overdraft / cash advance with a checking account

Paul Silverman's Avatar

Paul Silverman

06 May, 2009 03:08 AM

I have an overdraft protection account (ODP) that is tied my checking account. I have a set amount available for overdraft protection limit that increases and decreases when payments are made to the ODP or when withdrawals are made to the ODP.. How do I account for this bookkeeping-wise?

Do I keep 2 accounts, one for checking and one for overdraft? OR credit overdraft funds to my checking account when ODP is utilized and then debit funds from ODP when a payment is made on the ODP? OR is there a better solution. I'd like a detailed explanation, assuming a Moneydance for Dummies perspective. - Thanks!

  1. 1 Posted by John Selden on 07 May, 2009 04:55 PM

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    Where do your overdraft funds reside when they are not in use? Is it in a savings account, or is it just a special part of the checking account that is not ordinarily usable like the other funds? Your idea of having a separate overdraft fund sounds like the best bet. Just record a transfer of funds back and forth as needed to reflect use of the overdraft.

  2. 2 Posted by Paul Silverman on 07 May, 2009 05:50 PM

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    The funds are not ordinarily usable like other funds. The overdraft is a line of credit accessible only by my checking account. It is, I believe, a separate account. I can view it separately online so I make this assumption. Generally the checking account is funded in increments of $100. I am billed by monthly by the bank for interest payments.

  3. 3 Posted by Mary on 07 May, 2009 06:05 PM

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    Isn't that sort of thing essentially a loan account? Maybe setting it up as a loan is what you need.

    Mine works differently and takes an overdraft from my savings account with a small fee - no interest charges for mine.

  4. 4 Posted by Paul Silverman on 07 May, 2009 08:07 PM

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    I suppose it is a loan account as there is principal to be repaid and interest charged, though the loan is for an unspecified amount of time. Will someone provide good instructions on how to do this in Moneydance. Thank you.

  5. 5 Posted by Hans N. on 08 May, 2009 03:00 AM

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    I suggest using a simple Liability account, versus a Loan Account. Loan Account looks geared towards a mortgage or other similarly structured loan.

    With the Liability account, you can enter transactions against the Liability account from your checking account when overdraft is used and later paid back. Interest can be booked against your specified Expense Account. This way you can track what you owe in overdraft funds by looking at the Liability Account and it correctly reduces your net worth as a debt to your bank, while the interest paid is tracked as just another expense.

  6. 6 Posted by Ben Spencer on 21 May, 2009 11:36 PM

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    Hi Paul

    I am sorry I did not respond to this discussion my self in a timely manor. Are you sufficiently satisfied with the information provided in this discussion such that I can mark the issue as resolved? Or do you require further assistance?


    Ben Spencer

  7. 7 Posted by Thomas on 18 Aug, 2009 03:48 AM

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    I have a similar situation with a home equity loan that is tied in with my overdraft. It looks like a regular "checking account" would work, however it would need interest fields I guess. I have little experience, but I will test several methods to see what works. The liability account is a quick fix imo, but it should work and all you need to do is add the interest as an expense every month.

  8. Angie Rauscher closed this discussion on 24 Jul, 2011 06:51 PM.

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