What is Overdraft Protection?

If you’ve ever had a checking account (what is a checking account?) you’ve almost certainly found yourself at a point that you wished for overdraft protection. Even if you don’t know what that is, its absolutely something you were wishing for if you ever found yourself having spent more than is in your account.

What is an Overdraft?

Overdrafting is the action of spending more from a checking account than you had deposited in the account. This commonly happens to new account holders or even occasionally to the seasoned depositor who simply miscalculated their expenses for a month.

The problem with this mistake is that it can be rather costly to the account holder. Often times an overdraft that totals under a dollar can result in $25.00 – $30.00 charges, depending on the Financial Institution.

What is Overdraft Protection?

Many banks offer an outstanding service called overdraft protection. This requires the account holder to have both a Checking Account and some form of Savings Account. By speaking with a teller, the holder can then have the two accounts linked, so that in the event of an accidental overdraft the necessary funds would be funneled from the Savings Account to the Checking Account in order to cover the gap.

This service is ordinarily free and takes only minutes to set up. It can save you hundreds of dollars after only a few miscalculations in spending.

How can I avoid Overdrafting?

Well, aside from simply relying on Overdraft Protection, there are several measures you’ll want to employ in order to avoid making this mistake and eating away at your savings.

1. Employ Online Banking (What is Online Banking?)
   Be sure  to check your balances regularly.  If you use a smart phone, many banks also have “apps” for checking your balance on the go.
2. While out and about, use your bank’s balance check phone number.
3. Be sure to balance your checkbook.