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What Is Overdraft Protection?

Back to Basics: Use Your Overdraft Protection Wisely

Sometimes, we pretend things are there when they're actually not — like a connection with the guy who works in the office across the hall or positive cash flow in our bank accounts. An account balance that's dangerously flirting with zero is at risk of accruing heavy fees and could put you even further behind on the quest to get your finances on track.

Many checking accounts come with the option of overdraft protection, which means a check won't bounce if you write it for more than your account's balance. Different overdraft protection plans come with varying limits, and using overdraft protection is like borrowing money from the bank — with high interest rates in tow. So why use it at all?

I've never heard of a bank not charging a high penalty for bouncing a check, but you can end up paying less by using overdraft protection and quickly repaying the bank. Be sure you're aware of all possible charges before adding this feature to your account and know your bank may take away your privileges if your account is constantly dipping into the negative. Also, if you ever want to use your bank to get a loan, habitually relying on overdraft protection would give the impression that you may not be a credit-worthy customer.


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