Forget all those warnings the do-gooder financial counselors give you about overdrawing your checking account, aka writing bad checks. We’ve got your back, well, sort-of.
First let’s be clear on what an overdraft is. An overdraft is what happens when you write a check without enough money in available funds in your account to cover it. Now if we (meaning our brilliant computer algorithms) think that there is a significant chance you won’t cough up the money to cover the overdraft, we’ll refuse to pay it, and charge you a hefty fee. The recipient’s bank (the bank where the check was deposited) will get it back from us marked NSF (not sufficient funds) and likely charge the person or organization to whom you wrote the now bounced check. Note that if you have enough in uncollected funds (money in your account that hasn’t yet cleared), and we don’t trust you’ll march in with funds to cover the check, we’ll probably pay it anyway, encumber the amount needed from the uncollected funds, and still charge you a fee.
Let’s suppose you’re a customer with a high credit score and a good history with the bank such that our computer system thinks there is very little chance that you won’t make the check good. Well probably do you the favor of paying it, and hit you with er, let’s call it a token fee: maybe $25 or $35 or $45. Note that even if you overdraw your account by say, $10, we’ll still charge you a fee of $25 or $35 or $45. But hey, we paid the check(s) and saved you a big headache. You’re welcome!
But wait it gets even better (for us). If you write several checks, without adequate collected funds in your account to cover them, we may and likely will, charge you an overdraft fee for each overdraft check. Even if the total overdraft is small, say $25, but it’s the result of 5 checks for $5 each, you may be charged say, $30 for each of the $5 checks you wrote and be charged $150. Nice deal for us, huh!
Note that we offer overdraft protection. That is, customers who meet our credit criteria are offered this protection such that we’ll automatically cover overdrafts. Of course you’ll pay a fee for each overdraft, as well as interest on the amount we had to lend you to pay the overdraft, and in most cases, an annual fee for the overdraft protection privilege.
A final nice thing about overdrafts: we come off as the good guy for doing you the favor of covering them, and you come off as the bad guy for writing bad checks, and we get to collect generous fees. It’s fair to say, we love overdrafts!