Overdraft protection is a banking service that prevents transactions from overdrawing your account or from being declined due to insufficient funds. It works as a safety net, ensuring your debit card purchases, checks and other transactions process without issues, even if your account balance is too low. Here’s how it works:

How Overdraft Protection Works

When you have an account with overdraft protection, your bank links your checking account to another account, such as a checking account, savings account, credit card or other line of credit. If you make a transaction that exceeds the balance remaining in your checking account, the bank will automatically transfer funds from your linked account for the shortfall amount. This action prevents the transaction from being declined or prevents a check from bouncing. Not only does it save you the inconvenience of declined transactions, but it can also help you avoid overdraft fees¹ and penalties for insufficient funds from your bank.

Benefits

Overdraft protection helps ensure your transactions process even if your account balance is too low to cover the transaction. It helps create a buffer for unexpected expenses or poor timing between deposits and withdrawals.

Drawbacks

Banks may charge fees for each overdraft transaction. If multiple transactions occur, those fees could stack up quickly. If your linked account to cover overdrafts is a credit card or line of credit, you could owe interest on the borrowed amount. Relying on overdraft protection could cause you to accumulate debt if you do not manage your finances with care.

Overdraft Protection Options

Cadence Bank offers multiple overdraft protection options to help you dodge the inconvenience of insufficient funds:

Overdraft Protection Tied to a Deposit Account

It works by linking your checking account to another checking or savings account. When you overdraft one account, funds will be debited from the linked account in the amount of the transactions drawn against your insufficient funds and deposited into your checking account up to the account’s available balance².

Overdraft Protection Tied to a Credit Card

It works by charging your Cadence credit card for cash advances in the total amount of transactions drawn against your insufficient funds up to the available cash advance limit on your credit card.

Overdraft Protection Tied to a Line of Credit

Home Equity Credit Line³ protects your account by issuing a line of credit and charging your credit line in the amounts of the transactions drawn against your insufficient funds up to the available limit.

To learn more about overdraft protection offered by Cadence Bank, find a branch or visit us online.

Disclaimers:

1. Under our standard Overdraft practices:
   We will charge you a fee of up to $36.00 each time we pay an overdraft.
   For consumer accounts, we will assess no more than 4 overdraft fees per account per day (Daily Limit). No overdraft fee will be imposed if, after the end-of-day processing, your available balance is overdrawn $10.00 or less. However, if after the end-of-day processing, your available balance is overdrawn by more than $10.00, you will be charged an overdraft fee for each overdraft for that day subject to the Daily Limit.
2. Available balance is the most current record we have about the funds that are available for your use or withdrawal. It includes all deposits and withdrawals that have been posted to your account, then adjusts for any holds on recent deposits and any pending transactions that are known to us. This balance may not reflect all of your transactions, such as checks you have written, automated clearing house transactions we have not received, or debit card transactions that have been approved but not yet submitted for payment by the merchant. For more information on how we calculate your available balance, please refer to the Terms & Conditions of Your Account.
3. The Home Equity Line of Credit is not available as overdraft protection in Texas.

Sources:
https://www.cnbc.com/select/what-is-overdraft-protection-and-how-does-it-work
https://cadencebank.com/personal/overdraft-protection

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.