Overdraft protection is a checking account feature that allows you to write checks for more than the balance in your account. It provides a safety net to protect you from accidentally overdrawing your account. Some banks allow you to cover overdrafts automatically from your savings account, money market account, or credit card account.

The most common method of covering overdrafts involves establishing a line of credit, which typically has an interest rate that can be as much as two times higher than the going rates on credit cards or loans. The cost to you could be substantial if you don't repay it right away. There can also be a fee each time funds are drawn from another source to cover your overdraft.

If your overdraft protection is linked to your credit card, the bank issues a cash advance to cover your overdraft and charges it to your credit card. You pay a cash advance fee of 2 to 3 percent plus the fee your bank charges for the transaction, plus whatever interest you incur before you pay the cash advance back.

Overdraft fees are one of the costliest banking mistakes you can make, and you should avoid them like the plague. Even if you don't balance your checkbook, at least compare your check register to your bank statement to make sure you've recorded all checks and ATM withdrawals and that the bank has properly credited you with all deposits. This will help prevent bouncing checks.

Typical fees for insufficient funds range from $20 to $35. Often when you bounce one check, at least one more check will bounce before you're aware of the problem, and before you know it you can rack up over $100 in bounced check fees.