21 Jan

What is Overdraft Protection and Why Do You Need it?

What is Overdraft Protection?

RMLEFCU Overdraft ProtectionOverdraft protection is best described as a short term loan from your credit union that is activated when you purchase something with a debit card or a check that is more than the amount of money you have in your account. Instead of bouncing a check or being denied the transaction, the financial institution will cover the cost of the purchase for a fee, and expect that you will replenish your empty checking account soon. Overdraft protection has earned a bad reputation largely due to the hefty fees associated with each overdraft charge. Fees for each transaction can be as high as $35.00, so when you overcharge your account for that $5 latte, you’re really paying $40.00. However, there are many benefits to having overdraft protection on your account, including avoiding bounced check fees, Not Sufficient Funds (NSF) fees, the ability to make a purchase in an emergency situation, and avoiding the embarrassment of having a card turned down for insufficient funds.

Obviously, the best way to avoid overdraft fees and spending is to keep an eye on your bank account and manage your spending to fit your income. However, everyone runs into financial hiccups every once in awhile, and it’s comforting to know that overdraft protection is there for emergencies. To receive all the benefits of overdraft protection and avoid the nasty fees that come with it, ask your financial institution if they offer an overdraft line of credit or the ability to link your checking to your savings account. Read More