What is overdraft protection?

What is overdraft protection?

• A. It is a service that links accounts or lines of credit to cover transactions that exceed available funds.
• B. It is a feature that increases your daily debit limit.
• C. It is a type of fee charged for overdrafts.
• D. It is a card that automatically covers cash withdrawals with credit.

Answer: (A)

Overdraft protection is a banking service that links your checking account to another fund source, such as a savings account or a line of credit, so when you spend more than you have, funds are automatically transferred to cover the difference. This keeps debit card purchases, checks, or withdrawals from being declined and helps you avoid interruptions in payments. It’s not about simply raising a daily debit limit; it’s about having a backup source of money to cover shortfalls. Depending on the setup, transfers come from a linked savings account or a linked line of credit, and fees or interest may apply.

Overdraft protection is a banking service that links your checking account to another fund source, such as a savings account or a line of credit, so when you spend more than you have, funds are automatically transferred to cover the difference. This keeps debit card purchases, checks, or withdrawals from being declined and helps you avoid interruptions in payments. It’s not about simply raising a daily debit limit; it’s about having a backup source of money to cover shortfalls. Depending on the setup, transfers come from a linked savings account or a linked line of credit, and fees or interest may apply.