Overdraft is overspending. It is a type of lending. For example, you make a purchase in a store. You have $20.000 on your account, and the purchase price is $25.000. You are making a purchase, but $5000 is an overdraft, this is money that the bank has provided to you. With the help of this service, you were able to acquire the thing you liked if there were insufficient funds in your account. The bank automatically provides you with the missing money, but your account will have a negative balance. Money can be received repeatedly, in different amounts, but at the same time, it is impossible to exceed the established limit.
Types of overdrafts
There are two types of overdraft:
- agreed overdraft. This is the same loan that you received from the bank. You apply for it, and the bank approved the limit you requested.
- overdraft facility. This is the very cost overrun that occurs without your application due to the origin of the payment systems.
We have assessed this option in three banks – Cardinal Bank, Capital One and Bank of America.
Overdraft policy in Bank of America
Bank of America policy helps clients to avoid extra fees. When there are not enough funds in your personal account the bank won’t authorize ATM withdrawals or everyday debit card purchases. This bank offers two overdraft options such as checks and scheduled payments. These options imply the following pattern:
- Option 1: Standard $35.00 per overdraft or declined/returned transaction.
- Option 2: Decline-All $35.00 per declined/returned transaction.
Having offered overdraft protection, the bank will automatically debit available funds from your savings, credit card or eligible checking account. It is possible to conduct one fee per day.
Capital One overdraft protection
This bank offers the following options in the form of overdraft protection:
- Auto-Decline – the bank will decline to conduct transactions that will result in an overdraft of your personal account.
- Free Savings Transfer – the bank will automatically transfer available funds from your savings or money market account.
- Overdraft Line of Credit. This option is characterized as a loan. This loan implies transferal of funds to the client’s checking account to cover an overdraft. There are additional charges here, contact the support group to get acquainted with the details.
- Next Day Grace – the bank will charge a 35% fee within 24 hours from the moment you have borrowed money.
Overdraft protection in Cardinal Bank
- Express Line of Credit – If you need more funds you have on your account the bank will transfer your savings from other credit cards to the specified account with this Express Line of Credit.
- Savings/Money Market Overdraft Transfer – The bank also offers overdraft protection from the transfer of funds from a savings or money market account.