What is an overdraft?
An overdraft occurs when you don’t have enough money in your account to cover a transaction, but the bank pays the transaction anyway. You can overdraw your account through checks, ATM transactions, debit card purchases, automatic bill payments, and electronic or in-person withdrawals.
Many banks and credit unions offer overdraft protection programs in which the bank or credit union generally pays the transaction and charges you a fee (in addition to requiring repayment of the overdraft amount). Overdrafts can also be covered through a transfer of funds from a linked account, credit card, or line of credit.
Tip: Know your fees. Banks and credit unions have different fees associated with overdraft protection so be sure to ask what the account terms are with respect to the cost of overdraft protection, a linked account or a line of credit, when shopping for a checking account.
Tip: Deposits to your account may not be immediately available for your use. Always make sure you have sufficient available funds in your account. Even if you just made a deposit, you may still overdraw your account.