Overdraft Protection

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DEFINITION of 'Overdraft Protection'

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."

INVESTOPEDIA EXPLAINS '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?

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