Overdraft Protection

A checking account feature in which money from another account in your name is used to cover the transaction(s) if you don't have enough money in your checking account. This protection may or may not be free, but it usually costs less than an overdraft fee.

Overdraft protection is a bank line of credit. It's activated if you have insufficient funds to cover a check written against your account, up to a predetermined limit.

As with other forms of credit, you are charged interest once the line of credit is activated. If you qualify for it, overdraft protection can help you avoid the fees, inconvenience, and embarrassment of accidentally bouncing a check.

However, because banks often charge relatively high interest rates for the service, it's best to repay the transferred amounts quickly. And some banks charge a monthly fee for having overdraft protection linked to your account, even if you don't use it. Others may not offer the protection on low-cost accounts.