Overdraft protection

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

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 ?
com Confirms that Payday Loans Are a Better Option than Late Fees, Disconnection Fees, Overdraft or Overdraft Protections Fees.
These results show that many bank customers value debit card overdraft protection and are willing to pay for the service," said Nessa Feddis, ABA vice president and retail banking expert.
And honestly, I won't be surprised if, after all this effort and expense, banks will see their overdraft protection fees gradually creep back up close to previous levels.
Apparently there are some attorneys who have overdraft protection on their accounts and the rule doesn't directly address that," Sasso said.
Unlike traditional overdraft protection, this product includes the bounce protection amount in the customer's available balance.
For the same reasons, the individual should arrange for a line of credit or overdraft protection at his bank before he quits.
26 and paid Franz $98 in overdraft protection and returned item fees charged to her account for a total reimbursement of $914.
Most credit unions have overdraft protection programs because it is something their members want and need.
Beginning in August 2010, banks have been required to get their customers' permission before enrolling them in overdraft protection covering ATM and debit card transactions.
Customers receive a flat interest rate, unlimited free non-TD Bank ATM transactions, refunds of ATM fees charged by other ATM providers (with $2,500 minimum checking account balance), free standard checks, a safe deposit box discount, free stop payments, incoming wires, official checks/money orders, and overdraft protection transfers.
A survey that was commissioned by ABA has shown that about 46 per cent of US bank customers would opt for overdraft protection.
First National Bank of Fort Smith, which charges a $27 overdraft fee, is going to send out notices encouraging customers to sign up for the overdraft protection, said Sam T.