Overdraft Protection—A Financial Safety Net

While paper checks aren’t very common, most people use checking. In these accounts, money is subtracted when a transaction occurs. If there are no available funds and you attempt a purchase, it triggers an overdraft & your card will be declined.

If you have overdraft protection on your account, a financial institution will cover such a transaction and the purchase will go through, avoiding the inconvenience & awkwardness of being declined. Understanding this service and using it wisely can prevent a potentially destructive financial cycle.

Opting In

At America First, checks, automatic debits, and other payments or withdrawals you authorize for checking have automatic overdraft protection. Debit cards, however, aren’t covered unless you specifically request it. You can sign up online, visit a branch or call 1-800-999-3961 to opt in. This one-time step will cover all your debit card purchases and you can always opt out later if you change your mind.

Line of credit versus overdraft service

A line of credit is an open-ended loan, which means it can be used and paid off repeatedly. When it’s attached to checking, charges over your balance are applied to the line. It’s an extra buffer zone between how much you have, how much you can spend, and it helps you avoid overdraft fees.

The Cost of Non-Sufficient Funds

It doesn’t cost anything to sign up for overdraft service & most members never use it, but if your checking balance and line of credit are both exhausted and overdraft protection kicks in, there’s a $25 per-transaction fee. So, if you go to three different stores when your account & line of credit are maxed out and you buy three things, you could be charged up to $75 in fees on top of the purchase costs. It’s safe to say you shouldn’t rely on overdraft service & you should only use it in an emergency.

Keeping an eye on your checking balance, paying off your line of credit and spending responsibly will keep you from needing overdraft protection. However, knowing it’s there for emergencies will give you a little extra peace of mind.