Signing for an overdraft protection can save your checks from bouncing, and your transactions from getting declined because of insufficient funds in your bank account. But some banks might charge you heavily for this feature. So, should you have an overdraft protection enabled or not?
What Is It?
In an overdraft protection, your current bank account is usually linked to a backup source of money, which would be used if your bank account ever has insufficient funds to fulfill a transaction. The linked accounts may contain a credit card, a savings account or a credit line, but beware, your bank would charge a hefty fee if you don’t have any of these accounts linked for backup.
With overdraft protection, your bank account would never decline a payment. Here are some benefits of overdraft protection.
- The checks and other transactions would easily go through if you have signed for overdraft protection.
- High fee might be charged by your bank to fulfill the transaction if even your linked accounts lack the funds to fulfill your transaction.
- Be sure to read all the terms and conditions carefully before signing up for overdraft protection, as missing out any minor detail can cost you a fortune.
There are several things that you’d need to avoid of you’re signing up for an overdraft protection.
- The interest rate on the borrowed amount is usually higher than that of a credit card. Alternatively, you can transfer money from credit card to debit card and fulfill any transactions to avoid the hefty fees.
- If your bank account fails to complete the transaction, than you’ll have to face a big fine. And additionally, the party with the check can report the issue to the relevant authorities, causing your banking history to deteriorate (just like a bad credit report).