A service offered by banks that helps prevent transactions from being declined when there isn't enough money in a checking account. It automatically transfers funds from a linked account or extends a line of credit to cover the shortfall.
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Banking
Overdraft Protection
Definition
A service offered by banks that helps prevent transactions from being declined when there isn't enough money in a checking account. It automatically transfers funds from a linked account or extends a line of credit to cover the shortfall.
Example
When Emily accidentally overspent and her checking account went negative, her bank's overdraft protection automatically pulled funds from her linked savings account to cover the transaction, avoiding a bounced payment.
Key Points
- 1Prevents declined transactions and returned checks.
- 2Can link to a savings account, credit card, or line of credit.
- 3May incur fees or interest charges depending on the service type.
- 4Helps maintain a good banking relationship.