Are you tired of living without a bank account? If so, you can get a checking account by choosing and visiting a bank. All banks offer checking accounts; however, these accounts may have differences. One thing they may all offer, though, is overdraft protection. Do you know what this is and how it works? Do you know your options? As you prepare to get a new checking account, it might help you to understand more about overdraft protection. 

The Definition of an Overdraft

If you have never had a checking account, you might not be familiar with the term "overdraft." An overdraft is a situation when you use more money in your account than you have available. It refers to a time when your bank account drops below $0 and is in the negative.

For example, if you had $20 in your account and wrote a check for $25, your balance would drop to negative $5 once the check clears. Your bank calls this an overdraft. Whenever your balance drops into the negative, it is an overdraft. Overdrafts are not good and can result in fees and other problems.

Banks Offer Overdraft Protection

When you open a new checking account, your bank might let you take advantage of overdraft protection services. This service pays the balance when you overdraft your account, which means that your transactions will always go through.

For example, if you put $30 of gas in your car but have only $20 in your account, your bank will let you pump $30 of gas. Your bank allows you to overdraft your account.

You will have an overdraft charge to pay, but you will never have to worry about getting declined for a transaction if you use your debit card. If you write checks, you will never have to worry about the bank sending them back if you have overdraft protection.

You Can Opt-Out of Overdraft Protection

If you do not want the bank to cover your overdrafts, you can opt-out of this service. If you opt-out, you would never be able to use your debit card unless you had enough money in your account. If you wrote a check and did not have enough money to cover it, your bank would send the check back.

Understanding how overdraft protection works can help you make an informed decision about whether to opt-in or out. If you have questions about this or free checking accounts, contact a bank today.