What is Overdraft Protection and Why is it Important?

Let’s face it — anyone can make an honest mistake. We may forget to make a deposit or forget that we paid for a bill ahead of time. There are several reasons why account holders may make a miscalculation or minor budget oversight — even for the most financially savvy among us. Thanks to the Overdraft Protection that the credit union offers, you’re covered. Let’s look at what overdraft protection is and why it’s important.

What is Overdraft Protection and Courtesy Pay? Overdraft protection is a service offered by the credit union which allows a payment that you have made to someone like Ameren, Charter, Walmart or your babysitter to be paid temporarily even if you do not have enough money in your account to cover it. 1st Financial can cover your overdrafts in two different ways:

  1. We have standard overdraft coverage, such as a link to a savings account that comes with your account.
  2. We also offer Courtesy Pay Overdraft Protection, which is a discretionary service that allows us to pay an item presented against your checking account even if it causes the account to become overdrawn.

Why it’s important? Here are some benefits to Overdraft Protection and Courtesy Pay:

  • They prevent charges like return check fees from the company being paid, which could be anywhere from $20 to $40.
  • They allow you to avoid being embarrassed or damaging someone’s trust, especially if the payment was to someone who you know really well or frequently do business with.
  • They also consent you to avoid disruptions in service like having your water shut off or not being able to fill your gas tank in your car when you (and your checking account) are on empty.

Know your limits. 1st Financial will charge you a fee of $29.50 each time we pay an overdraft. There is no limit on the total fees we can charge you for overdrawing your account. This can be both a blessing and a hurdle for you. As your bills and charges aren’t going unpaid, you could be digging yourself a very deep negative balance hole that will be hard to get out of. Know that in so desperate situations, overdraft protection and courtesy pay is there to cover you.

Adding overdraft protection to an account is a practical and relatively inexpensive safeguard against potentially hefty overdraft fees. If you tend to keep a low balance in your checking account and don’t keep a close eye on spending habits, then overdraft protection could be for you. If you’re fortunate enough to keep a cushion of cash in your checking account and make it a point to routinely monitor your account, then overdraft protection may not be necessary. If you’re on the fence, remember that nothing is set in stone; the credit union is always here for you and overdraft protection can be added or removed from your account at any time.

Be Smart,
Chelsea Springli

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