What is Bank Overdraft Protection?

It happens to the best of us, sometimes we misjudge the amount of money in our checking accounts and find ourselves with overdraft fees. If you have outstanding checks or automatic payments coming through on an account that is charging you overdraft fees, you might want to consider setting up an account with bank overdraft protection.

Bank overdraft protection is a painless form of account security set up to ensure you have enough funds in your account to make sure your charges clear.  Overdraft protection is very simple to keep track of and easy to set up.

Setting up Bank Overdraft Protection

To protect yourself from overdrafting and being charged with overdraft fees, many banks offer what’s called “bank overdraft protection.” It’s a good thing to take advantage of, and be aware of. To avoid overdraft fees, see if your bank will let you do one of the following:

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  1. Link your checking account to a savings account, if you have a savings account with the same bank. If you overdraw your checking account, the bank automatically transfers money from your savings account to cover the shortfall.
  2. Set up an overdraft line of credit. To do this, you would need to apply for a “line of credit,” the same way you would apply for a loan. If you qualify, the bank will extend a line of credit to you as overdraft protection, which you would pay back when you have funds in your account again. If you are interested in opening a line of credit, it’s a good idea to do so before you start bouncing checks.
  3. Link your account to a credit card for overdraft protection if you have one with the bank. Be careful, though, because any overdraft amount will be charged as a cash advance and subject to whatever interest rate your credit card charges.

About the Author

These articles are written by the in-house GOBankingRates team.