Banker Question: Can overdraft protection help you avoid huge fees?

When you open a new checking account, you’re typically given the option of opting in for overdraft protection. But it comes at a steep price.

Suppose there’s only $20 in your checking account, and you try to buy $30 worth of groceries with your debit card. If you have overdraft protection, your bank will cover the $10 difference on your behalf—either by transferring money from another one of your accounts or by opening a line of credit in your name—but charge you a fee, often about $35. If you don’t have overdraft protection, the transaction will be declined, and you won’t owe any fees.

If you have multiple checking accounts or a credit card, overdraft protection is almost certainly a bad deal because you can simply swipe a different card should you accidentally overdraw one account. The only time it might be a nice feature is if you have a true emergency and no other way to access funds.

Bottom line? If you decide overdraft protection is right for you, be sure to keep regular tabs on your account balance.