How Does Overdraft Protection Work?

Overdraft protection is designed to cover your purchases should you accidentally spend more money than you have in your bank account. We hope you never need to take advantage of this feature on your account. However, if something goes wrong and you find yourself a little short, it’s essential to understand how it works and the penalties involved. This way, you can minimize the damage to your finances now and later.

What Overdraft Protections are Available?

There are three basic types of overdraft protection available to most consumers:

  • Debit Overdraft Protection: If your account has debit card protection, then the bank will cover any debit purchases up to an agreed-upon amount for a fee.
  • Savings Link: Most banks and credit unions will link your checking account to your savings account, automatically transferring money to cover accidental overages. There may or may not be a fee associated with this type of protection.
  • Line of Credit: Some institutions allow customers to take out a line of credit linked to their deposit accounts. This line will cover any spending overages plus fees incurred. There can be high fees associated with these types of credit products.

Each of these methods has its issues, but overall, opting for overdraft protection on your deposit accounts is a smart idea.

Why Overdraft Protection?

While the fees associated with overdraft protection may seem daunting, there are sound reasons why risking those fees is in your best interest:

  • Purchase Approval: You won’t have to worry about your card being declined when you attempt to make a purchase and your account is a little short. This is handy if you have an emergency and need your products right now.
  • Discretion: Everyone makes mistakes sometimes, and having your card declined because you added your register wrong is embarrassing. Overdraft protection means the only person who knows about your error is you.
  • Protection: Say your direct deposit was a day late, but you paid the rent assuming it would be there. Overdraft protection ensures you still have a roof over your head while you get your accounting in order.

Public Service Credit Union is Here to Help

To learn more about the benefits of overdraft protection, drop by a PSCU branch today. We’ll show you why more Detroit consumers are flocking to credit unions like ours over banks every day, especially when they’re considering a personal loan over a payday loan.

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