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What the Heck is Overdraft Protection?

| Rocky Mountain Credit Union

Put simply, overdraft protection is your emergency backup. Whether you forget to move money into your account or you need a little buffer to get you through until payday, overdraft protection is your safety net. 

You can opt into the service when you open an account, linking your checking account to another (it can be savings, credit cards or other lines of credit). This guarantees that your ATM transactions, checks, wire transfers and debit card transactions will clear, even if your account balance dips below zero. You don’t have to worry that the check you wrote your niece for her birthday will bounce because you forgot to balance your checkbook. And you don’t need to check your account balance while you’re waiting in line at the grocery store. You’re just covered. 

But if you still have a few questions, here’s everything you need to know about overdraft protection.

Woman worrying about finances.

 

Fee Busting to Save Money 

Overdraft fees (when you have insufficient funds to cover checks or purchases) can be higher than $30 per bounced check. That’s not going to be kind on your wallet, especially when a few moments of forgetfulness start to add up. 

 

When you set up overdraft protection, you’re giving yourself a break on fees. You shouldn’t need to pay to use your own money, and that’s the premise that overdraft protection is built on. 

 

A Helping Hand When You Need It Most 

We get it: sometimes times are tough, and it’s out of your control. Overdraft protection is there to help you out when you’re waiting for a check to clear or you’re trying to make it to your next payday.  

 

You can rest a little easier knowing that you have an extra cushion to help catch you in your time of need. You shouldn’t have to worry about running out of money and having the fees start to pile up. That’s where overdraft protection comes in.  

Explanation of overdraft protection.

Types of Overdraft Protection

There’s more than one way to do overdraft protection. Here are the options RMCU offers to protect yourself from overdraft fees. 

 

Linked Deposit Account 

A linked deposit account is the most common type of overdraft protection. This is another account, usually a savings account or a different checking account with the same financial institution. If you choose to link a savings account, just keep in mind that they are subject to transaction limits each month or you may incur fees. 

 

Overdraft Line of Credit

An overdraft line of credit is a loan set up with your financial institution specifically for overdraft protection. There’s usually a small annual fee involved, as well as an interest rate charged on any funds borrowed. But it can be a good alternative to linking to a credit card or another low-balance account.

Image of a linked credit card.

Linked Credit Card

A linked credit card lets you borrow from your credit balance to cover any overdraft on your checking account. When you link a credit card as overdraft protection, just be sure to note that any withdrawal from that card is considered a cash advance, so higher interest rates may apply depending on your credit agreement. 


Your financial life doesn’t have to feel complicated. Check out the account offerings from RMCU to help streamline your finances.

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