Overdraft Protection

Overview

No one likes to bounce a check. And no one wants the hassle of being stuck at the register with no way to pay for a purchase. The vast majority of bank customers spend only what they have available in their checking account. For the occasions where a check or a debit card swipe is for more money than is in the account, banks provide a layer of protection to cover the mistake. This is called overdraft protection.

Overdraft protection services come in several forms. The checking account can be linked to another account or line of credit to draw funds to cover the check or purchase. Banks also offer a "courtesy overdraft" service of automatically covering the overdraft.

Customers appreciate the convenience and peace of mind overdraft protections services provide. They avoid additional fees and punishments imposed by merchants and creditors for bouncing a check. They also avoid worrying about transactions being denied at the gas pump, grocery store register, when paying the check at a restaurant, etc.

There is much debate about fees and how the programs are administered. The fees cover the risk the bank takes on in case the overdraft goes unpaid. And, since most people don't plan to overdraw their account, it is beneficial to have the program automatically applied to the account.

Resolving issues and concerns about overdraft protection programs is a CBA priority issue. Members of CBA's Deposits Committee work with the CBA team to educate legislators and regulators about how banks go about providing this valued service to bank customers.

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