How Overdraft Protection Works

Many banks offer overdraft protection to their clients to prevent the customer from attempting to withdraw more funds than are present in a given account. Overdraft protection can also apply to debit cards. Overall, the protection is meant to help the customer.

If a person has overdraft protection on an account, the bank will cover the check or pay the money for the accountholder. In this situation, the accountholder writes a check for $100 but only has $95 in the account, the bank might allow the check to clear and simply expect the accountholder to pay the missing $5 later.

Another option is that the bank will draw money from the account holder’s savings account or another account to cover the difference between the check or the debit and what is actually available in the account.

Like all good things, there are limits. Different protection plans offer different limits on the amount of overdraft protection that is offered. In addition, it is possible that a bank will revoke the privilege if the accountholder frequently writes checks in excess of the available balance.

The majority of banks charge a fee for overdraft protection. This fee is in place mainly to prevent the accountholders from abusing the service. In addition, the fees create a source of revenue for the bank. Before using overdraft or even adding it to an account, it is important to ensure that all of the potential fees attached are understood.

Contact a Boston Bankruptcy Lawyer

If your account is constantly at zero funds and requiring overdraft protection, contact the Boston bankruptcy lawyers of Joshua Spirn & Associates at 1-800-975-5346 to discuss your case and to determine your legal options.