Overdraft protection is a service offered by some banks that can prevent you from bouncing checks and incurring fees (not to mention annoying anyone you write checks to). Normally, if you spend more money than you currently have in your account using a check or debit card, your check might bounce or payment might otherwise not go through and the institution you’re paying can charge you a fee (not to mention getting mad and maybe not wanting to do business with you in the future).

If you have overdraft protection, though, your bank will automatically pay the bill on your behalf (usually up to a certain limit) so the people you do business with won’t charge you or get mad. You will, of course, have to pay the bank’s fees for the service, so it’s better to know how much you have in your account before you go on any spending sprees.

Tags: overdraft, overdraft protection