Overdraft coverage is a service your bank may offer where your everyday, one-time debit card and ATM transactions may process even if you have insufficient funds in your checking account to cover the transactions. The bank covers the shortage until you repay it and may assess you an overdraft fee for doing so.
This article presents some of the pros and cons of overdraft coverage to help you decide if it may be right for you.
The Potential Advantages of Overdraft Coverage
What are some of the pros of overdraft coverage?
Everyday purchases may not be declined. Whether or not you have sufficient funds in your checking account for an everyday one time debit card or ATM transaction, overdraft coverage may allow the transaction to process.
The Potential Disadvantages of Overdraft Coverage
Now, the flip side. Here are some of the cons of overdraft coverage:
Fees can add up quickly. Overdraft coverage isn’t cheap, especially if you overuse it. Some banks may charge $30 to $40 per transaction. Think about how those fees could add up if you overdrew your account multiple times a month. Find out more about overdraft fees.
Overdraft coverage can encourage overspending. Sometimes having an overdraft coverage safety net causes people to pay less attention to how much they’re spending and to adopt the bad habit of letting overdraft fees accumulate. It can become a costly cycle that works against you and your financial goals.
Used wisely, overdraft coverage may allow you to make the everyday purchases that are necessary for your life. Check into your bank’s particular overdraft coverage services to find out if they may be right for you.