What is 'Overdraft Protection'

Overdraft protection is a line of credit that banks offer to their customers to cover their overdrafts. Overdraft protection kicks in when a customer writes a check for more than the amount in their account.

Also referred to as "cash reserve checking."

BREAKING DOWN 'Overdraft Protection'

Overdraft protection comes at a price. Although it does allow its customers to escape paying overdraft fees, it does charge interest on the amount floated to them. Many banks allow their customers to link their bank accounts to a credit card in order to avoid overdraft charges.

To learn more about overdraft protection, check out What are the pros and cons of overdraft protection?

RELATED TERMS
  1. Overdraft

    An extension of credit from a lending institution when an account ...
  2. Daylight Overdraft

    Occurs when a clearinghouse bank issues a payment during the ...
  3. Overdraft Cap

    The maximum dollar limit that a bank will send to another financial ...
  4. Bounced Check

    A slang word for a check that cannot be processed because the ...
  5. Available Funds

    Funds that are available to an account holder for withdrawal ...
  6. Linked Transfer Account

    Accounts held by an individual at a financial institution that ...
Related Articles
  1. Personal Finance

    Overdrafting

    An overdraft occurs when money is withdrawn from a bank account in an amount that exceeds the funds available in the account. Banks often permit this as a form of short-term loan to the account ...
  2. Personal Finance

    4 Ways to Ditch Bank Overdraft Fees

    At $35 a pop, overdraft fees can mount up quickly. Here are 4 different strategies for avoiding them.
  3. Insights

    Credit Unions Rake In Record Overdraft Revenue

    Banks and credit unions saw overdraft fee income rise to the highest levels since the Fed prohibited automatic ATM and debit card charges.
  4. Insights

    JPMorgan, BoA, Wells Fargo Draw $6.4 Bln in Fees

    Fees disproportionately impact low and moderate income families in America.
  5. Personal Finance

    Forget Your Bank Account - Use Your Credit Card

    What if you used your credit card as a bank account? Believe it or not, this strange strategy could actually work.
  6. Personal Finance

    Cut Your Bank Fees

    Find out how to get the bank to pay you for using their services, not the other way around.
  7. Personal Finance

    Banks to Cut Retail Fees on Higher Interest Rates

    Americans spent over $10 per month in bank fees in 2016, but they may spend less this year.
  8. Personal Finance

    Bank Fees Be Gone

    Not only are bank account interest rates measly, but fees can take a serious bite out your balance. Here's what to do.
  9. Financial Advisor

    Is A Premium Checking Account Worth It?

    Premium checking accounts give you free checking and other perks in return for keeping a certain balance in the bank. Is that the best use of your money?
RELATED FAQS
  1. What are the pros and cons of overdraft protection?

    If you sign up for overdraft protection and link your checking account to your savings account, a credit card or an overdraft ... Read Answer >>
  2. What is the difference between overdraft and cash credit?

    The primary differences between overdraft and cash credit lie in how they are secured and whether the money is lent out of ... Read Answer >>
  3. What's a better way to borrow money: overdraft or credit cards?

    Overdraft and credit cards will allow you to spend more money than you have, but whichever option you choose, be sure to ... Read Answer >>
  4. Can a checking account go negative?

    Find out about negative checking account balances and the ramifications. There is a price to pay, but smart consumers can ... Read Answer >>
  5. How does your checking account affect your credit score?

    Learn how your checking account is related to your credit score, as well as what types of banking activities do and do not ... Read Answer >>
Trading Center