Bank Overdraft Protection: Do You Need It? Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: Thomas Barwick/Getty Images August 22, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Karen Bennett is a consumer banking reporter at Bankrate. She uses her finance writing background to help readers learn more about savings and checking accounts, CDs, and other financial matters. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Robert R. Johnson, Ph.D., CFA, CAIA, is a professor of finance at Creighton University and chairman and CEO of Economic Index Associates, LLC. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our banking reporters and editors focus on the points consumers care about most — the best banks, latest rates, different types of accounts, money-saving tips and more — so you can feel confident as you’re managing your money. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Here is a list of our . Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. You may want to enroll in overdraft protection to ensure you won’t ever be turned down for a debit purchase or ATM withdrawal. It can be a helpful service if you ever spend more than what’s in your account, but it usually comes with a cost. Ultimately, it’s your decision to enroll in overdraft protection. Here’s some information to help you decide whether it’s right for you. What is overdraft protection
is a service provided by your bank that ensures your transactions are covered if you have insufficient funds in your checking account. The bank will automatically move funds you have available in another linked account to the overdrawn account. The bank may charge you for this service, but the price is usually considerably less than paying an overdraft fee. The average overdraft fee is $33.58 per transaction, according to . In addition to a savings account, you may be able to link to a line of credit to cover shortfalls to your checking account. Another option is linking to a credit card, whereby a cash advance is initiated to prevent the checking account from becoming overdrawn. Both the line of credit and credit card options may require you to pay a transfer fee as well as interest on the amount borrowed. Overdraft protection policies, including whether a fee is charged, vary by bank. Ask your financial institution to explain the details so you can decide if overdraft protection is right for you. The pros of overdraft protection
Overdraft protection provides some benefits: Your transaction will still clear even if you don’t have enough money in your bank account, helping to expedite transactions when you’re in a hurry, such as at a gas station or drive-thru. It could save you from embarrassment, too. Not all checking accounts charge a fee for overdraft protection transfers. But when they do, the cost is usually substantially less than paying an overdraft fee. It may allow checks to clear, which in turn can help you avoid returned check fees from merchants. It can provide access to funds in times of emergency. The cons of overdraft protection
There are also some drawbacks to overdraft protection: You’ll have to pay whatever fee your bank charges. Some banks assess a fee per overdraft protection transfer, which can result in multiple fees in a single day. Transactions may be declined if you don’t have sufficient funds in your linked savings account. It might encourage overspending for anyone who doesn’t realize the hefty fees involved. Should you opt in to overdraft protection
Ultimately, it’s your decision whether or not to choose overdraft protection. It might work well for you as a way to make transactions clear when you occasionally overdraw your account. It protects those who worry about finding themselves in the embarrassing situation of having their card declined. It also costs less than overdraft fees that can quickly add up before you realize your account is overdrawn. Imagine getting hit with a fee for every swipe — a $4 latte in the morning just became a nearly $40 latte. Your $10 lunch is now nearly $45, and so on. Other ways to avoid overdraft fees
Though overdraft protection has benefits and can offer convenience, the involved may add up quickly. One way to steer clear of such fees is to simply not opt in for overdraft coverage. Your bank will just decline a debit card transaction if you lack sufficient funds. It’s a way to avoid paying a penalty if the potential hassle or embarrassment is less painful to you than paying an overdraft fee. Another option is to switch your bank. Some banks and credit unions have restructured their programs to become more consumer friendly. Some accounts even let you overdraw up to a set amount . Lastly, keeping tabs on your has never been easier. You can that help you track your spending. You can also set up text or email alerts from your bank when your account drops below a certain level. Many banks offer multiple alerts. For instance, you can set one up for when your account drops to less than $75 and another for $25. Bottom line
Overdraft protection can be a helpful and convenient tool to avoid paying a steeper overdraft fee. Whether you should opt in, however, depends on your preferences. Consider your own budgeting and spending habits and weigh the benefit of convenience against the potential fees to decide for yourself. SHARE: Karen Bennett is a consumer banking reporter at Bankrate. She uses her finance writing background to help readers learn more about savings and checking accounts, CDs, and other financial matters. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Robert R. Johnson, Ph.D., CFA, CAIA, is a professor of finance at Creighton University and chairman and CEO of Economic Index Associates, LLC. Related Articles