overdraft protection

Definition

A checking account feature in which a person has a line of credit to write checks for more than the actual account balance. Instead of getting charged about $25 for bouncing a check, overdraft protection will in effect provide the account holder with an instant loan. The interest rate will be extremely high, but if it is paid off quickly it is usually much less expensive than the bounced check fee. Some banks do charge a fee when an account balance falls below zero even if the account holder has overdraft protection, but it's still significantly less than the bounced check fee.

Use this term in a sentence

I made sure to have overdraft protection in case something bad happened and I needed to take more money out.

​ Was this Helpful? YES  NO 10 people found this helpful.

The overdraft protection was enabled because paying the potential fee was an impossibility, psychologically, so we linked an additional account.

​ Was this Helpful? YES  NO 4 people found this helpful.

Unless you have thousands of dollars in your bank account, it's a good idea to have overdraft protection so that you don't get charged for things such as bouncing a check.

​ Was this Helpful? YES  NO 6 people found this helpful.

Show more usage examples...

Related Terms

Browse by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
overdraft draft