Overdraft protection

Overdraft protection is a service offered by banks that prevents a check being bounced for insufficient funds when a check written on a checking account exceeds the account balance. Usually with overdraft protection, the bank will pay the check borrowing funds from a prearranged letter of credit.

Expanded Definition

Make sure you understand the overdraft protection you have in place so that, for instance, you don't end up paying a $35 penalty for writing a $15 check.

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Related Terms

• Bounced check

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