4 Reasons to Get Overdraft Protection – Today

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Overdraft protection means no more overdue payments.

Key points

  • Banks cannot automatically enroll customers for overdraft protection. You must expressly request it.
  • Overdraft protection can save you money, embarrassment and missed payments.

As routine as opening a bank account may be, you are expected to make several important decisions. One is for the type of account you want to open and the other is for overdraft protection. Here, we’ll explain what overdraft protection is, how to sign up, and four ways overdraft protection can make your life easier.

What is overdraft protection?

Whenever there is not enough money in your checking account to cover a purchase you have made, your account is overdrawn. Let’s say you write a check for $120 to your kid’s soccer league and don’t realize there’s only $110 left in your account. At least two things are guaranteed:

  1. The football league will not be paid.
  2. Your bank will charge you a fee (national median overdraft fee is $30).

Overdraft protection is available to avoid such situations, and enrollment is easy. Whether you’re opening a new account or you’ve been with the same financial institution for years, simply link your checking account to another of your other accounts, such as a savings account or money market account.

Once you’re linked, you no longer have to worry about overdrafts. This is because the bank will withdraw the funds necessary to cover your purchase by check or debit card from your linked account. Although it’s not free, it costs a lot less than an overdraft (ranging from free to around $12).

Besides the money you’ll save, there are at least four other reasons why you’ll be happy to have overdraft protection.

Four reasons to get overdraft protection today

1. Your payment will be cleared

Life is busy and overdrafts happen. Imagine sitting down to pay your monthly bills. You miscalculated and have less money in your account than you think. Because overdraft protection is in place, all your bills are paid. Nothing is late and there are no late fees to pay.

2. No embarrassing payment returns

With overdraft protection, the company or person you paid will never know your bank account was short. All they will know is that your payment has been released to their bank account as you promised.

3. Less worries

Let’s face it: we all have hundreds of things to think about every day. Overdraft protection takes a worry off your plate. You can be sure that your bills will be paid, even if you have miscalculated your bank account balance or forgotten an overdue payment that has not yet been cleared by the bank.

4. Funds available at a glance

While it’s never a good idea to overdraw your bank account, there are times when it becomes necessary. Imagine it’s a Sunday night, the banks are closed and you’ve broken your arm. The emergency room will not treat your injury until you pay a copayment of $200. The problem is that you only have $150 in your checking account. Because overdraft protection is in place, you know you can make the $200 payment, even if it costs you a small fee.

A bank cannot automatically enroll its customers for overdraft protection. You must apply for coverage. Luckily, it can be as simple as calling customer service or talking to a cashier the next time you’re at a branch.

One thing to keep in mind: Banks are not required to notify you if a check or debit card payment is dishonored due to insufficient funds. That’s why it’s essential to keep an eye on your balance.

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