What is Overdraft Protection?
According to Investopedia, an overdraft is “an extension of credit from a lending institution when an account reaches zero.” An overdraft allows the individual to continue withdrawing money even if the account has no funds in it.
Basically, if you make a purchase but don’t have sufficient funds to cover it, your bank will still allow you to draft the funds. However, any deposits you make after that will go toward getting your account out of the negative, and you will likely incur a fee from your bank.
What are Overdraft Programs?
There are three types of overdraft programs that are typically offered at most banks:
1. Opting out — Just because your bank offers overdrafts doesn’t mean you have to use them. You can always opt out of the program, which will mean any time you try to make a purchase and do not have enough funds to cover it, your transaction will be rejected. This helps you avoid overdraft fees, but your bank may still charge an insufficient funds fee.
2. Overdraft transfer — Overdraft transfers allow you to link your checking account to another checking account or savings account and sometimes a line of credit or credit card. With this program, your bank will automatically transfer the funds from your linked account into your checking account if you overdraft.
3. Overdraft coverage — With overdraft coverage, you are basically taking out a short-term loan the bank will use to cover your overdraft. If you overdraft, your bank will loan you the funds and charge you a fixed fee.
First Bank* Offers Overdraft Protection
With First Bank, you can protect your account from overdraft fees with Ready Cash, a line of credit that automatically transfers funds into your checking account in the event of an overdraft. Every First Bank checking account comes with the added perk of Ready Cash, so you can be confident you are protected. Learn more about Ready Cash at a First Bank location near you.