Overdraft protection


Also found in: Dictionary, Thesaurus, Legal, Encyclopedia.

Overdraft Protection

The payment by a bank of a purchase by a client when that client's transaction results in an overdraft (which occurs when the account balance goes below zero). This allows the client to purchase whatever good or service led to the overdraft. The bank may assess a hefty fee for overdraft protection.

Overdraft protection.

Overdraft protection is a bank line of credit. It's activated if you have insufficient funds to cover a check written against your account, up to a predetermined limit.

As with other forms of credit, you are charged interest once the line of credit is activated. If you qualify for it, overdraft protection can help you avoid the fees, inconvenience, and embarrassment of accidentally bouncing a check.

However, because banks often charge relatively high interest rates for the service, it's best to repay the transferred amounts quickly. And some banks charge a monthly fee for having overdraft protection linked to your account, even if you don't use it. Others may not offer the protection on low-cost accounts.

References in periodicals archive ?
The Federal Reserve Board ("FRB") (25) undertook initial regulation of overdraft protection programs before the CFPB was created.
Beginning next month, businesses can link from any savings or deposit account to a checking account as part of overdraft protection with no charge.
Fidel Gonzalez, president/CEO of FICU, said the lawsuit is bogus because when the credit union implemented its overdraft protection program in 2012, it used another company, not JMFA.
More than half (52 percent) of community banks say that they are currently offering lines of credit in place of the overdraft protection.
Most customers, though, will probably welcome the overdraft protection because they don't want their debit cards to be declined, said Don Woodland, executive vice president and director of the Graduate School of Banking at Louisiana State University.
Legislation pending in Congress would require that consumers sign up for overdraft protection, rather than being enrolled in such programs automatically.
A Bar committee is working on a recommendation that would clarify that attorneys are prohibited from having overdraft protection on their trust accounts.
The amendments to Regulation DD, which implements the Truth in Savings Act, in part address the service often referred to as bounced-check protection or courtesy overdraft protection.
Interagency Joint Guidance on Overdraft Protection Programs.
The Federal Financial Institutions Examination Council (FFIEC) proposed guidance to help insured depository institutions improve their disclosure to customers with overdraft protection accounts (www.
Because the bank had not formally extended overdraft protection to the campaign account, the FEC considered the overdrafts to be campaign contributions--which banks are prohibited from making under the Federal Election Campaign Act of 1971.
Developed in association with Wirecard, the digital bank will provide customers with a bank account, debit card, overdraft protection and an interest-bearing savings account.