January 13, 2026
Written by Rebecca Lake
Certified Educator in Personal Finance®
Certified Educator in Personal Finance®
Rebecca Lake, CEPF, has been writing about personal finance and business for nearly a decade. Her work has been featured on CreditCards.com, Credit Karma, Credit Sesame, and other personal finance sites.
Overdraft protection is an optional service that transfers money from a linked savings account, credit card or line of credit when you go over the balance in your checking account.
While overdraft protection can help you avoid the pricey overdraft fees that some banks charge, it may come with fees and interest charges of its own.
Understanding the overdraft protection definition and how it differs from overdraft coverage can help you compare both services.
Overdraft protection can offer peace of mind if your bank account balance dips below zero.
With overdraft protection, you link a savings account, credit card or line of credit to your checking account. If you make a transaction that exceeds your checking account balance, the funds are transferred.
Overdraft protection can help you avoid rejected transactions and hefty overdraft fees, but it may come with its own costs. Understanding how overdraft protection works can help you decide whether it makes sense for your bank account.
If you've been wondering, "What does overdraft protection mean?" let's break it down. Simply put, overdraft protection is an optional banking service that can cover transactions which exceed your available balance.
To use it, you link another account, such as a savings account, credit card or line of credit, to your checking account.¹ If your checking account balance goes into the negative, your bank will automatically transfer money from your linked account to cover the shortfall.
Without overdraft protection, your bank might still cover the difference – known as overdraft coverage – but would charge hefty overdraft fees, often $35 per transaction.² Alternatively, it might reject the transaction completely.
That's not to say overdraft protection is always free – some banks charge a fee for this service. And if you're using a credit card or line of credit to cover overdrafts, you may have to pay additional fees and interest on the transferred amount.
Overdraft protection automatically transfers money from a linked account to your checking account to cover a negative balance. Let's say you have a balance of $80 in your account and swipe your debit card for $100. With overdraft protection, your bank would automatically transfer money from your linked account to cover the $20 gap.
There are a few options for what kind of account you can link, such as:
Savings account: You can connect your savings to your checking to protect your account from overdrafts. If you go this route, you'll need to have sufficient funds in your savings account to cover transactions.
Credit card: If you link a credit card, any transfers will be considered a cash advance.³ Unlike typical credit card charges, cash advances start accruing interest right away.⁴ They might also come with a fee, so read the fine print before going this route.
Line of credit: You can also link an established line of credit to your bank account for overdraft protection. Using a line of credit will also incur interest charges and potential fees.
Overdraft protection can have fees and interest charges. However, the costs may be lower than what you'd have to pay in overdraft fees if your bank were to cover the negative balance.
While overdraft protection can help you out in a financial squeeze, it also has some potential downsides. Consider both the pros and cons before you opt in.
Avoid overdraft coverage fees: Having overdraft protection means you don't have to pay overdraft coverage fees if you overdraw your account.
Free in some circumstances: You may not have to pay any fees if you use a savings account for your linked account.
Won't have transactions rejected: With overdraft protection in place, you won't have to worry about declined transactions or bounced checks.
Could incur fees and interest charges: Some banks charge an overdraft protection fee each time you use it. Plus, you may have to pay fees and interest if you use a credit card or line of credit to cover overdrafts.
Still possible to have transactions rejected: If you link a savings account with insufficient funds, you could still see declined transactions.
Could lead to more overspending: Since you won't see your purchases declined, overdraft protection might give you a false sense of financial security. This could lead to a cycle of overspending
Overdraft and related fees are still a major source of revenue for big banks. According to American Banker, these fees generated nearly $3 billion for the largest U.S. banks in the first three quarters of 2025.*
At Chime, we take a different approach. With SpotMe, Chime spots you money fee-free when you overdraw your account by up to $200.+
Overdraft protection and overdraft coverage sound similar, but they work in different ways. If you use overdraft protection, you're covering a negative balance from your own funds, whether from a savings account, credit card or line of credit.
With overdraft coverage, on the other hand, your bank will spot you money if your account falls below $0. Banks may charge as much as $35 per transaction for this convenience.2 These fees can add up quickly if you overdraft multiple times.
Not all banks charge fees for overdraft coverage, though. With SpotMe, Chime spots you money fee-free when you overdraw your account by up to $200.
You'll pay back the amount automatically the next time cash is deposited into your Chime checking or credit builder secured deposit account.
Overdraft protection can be a useful tool if your checking account tends to run low. Rather than borrowing from the bank to cover overdrafts on your checking account, you'll borrow from your own savings account, credit card or line of credit. Before opting in, though, familiarize yourself with the costs of using this service.
You can also consider fee-free overdraft coverage, such as Chime's SpotMe. By researching your options for overdraft coverage vs. overdraft protection, you can find the best way to manage your bank account and avoid costly overdrafts.
If you find yourself often going into the red, these 10 ways to stop spending money can help you get your budget back on track.
An overdraft protection fee is a charge your bank may apply when it transfers money from a linked account to cover a negative checking account balance. This fee often has a preset maximum amount and is typically lower than a standard overdraft fee.⁵
You can check if you have overdraft protection by signing into your bank account online or via mobile app, or by contacting your bank directly. You'll generally need to opt in and link an account to use this service.
You may benefit from using overdraft protection if you tend to overdraw from your checking account. It can be less expensive than overdraft coverage, especially if you connect a savings account. Consider the fees and interest when linking up a credit card or line of credit, though, as those costs can add up fast.
Chime® is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC.
Chime is not FDIC-insured. The Bancorp Bank, N.A. and Stride Bank, N.A. are the FDIC-insured members. Deposit insurance covers the failure of an insured bank. Certain conditions must be satisfied for pass-through deposit insurance coverage to apply. FDIC deposit insurance limit is $250,000 per depositor, per insured bank, per ownership category.
Chime Checkbook: While Chime doesn’t issue personal checkbooks to write checks, Chime Checkbook gives you the freedom to send checks to anyone, anytime, from anywhere. See your issuing bank’s Deposit Account Agreement for full Chime Checkbook details.
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This guide is for informational purposes only. Chime does not provide financial, legal, or tax advice. You should check with your legal, financial, or tax advisor for advice specific to your situation.
Information from American Bankers Association's "Understanding Overdraft Protection" as of May 28, 2025: https://www.aba.com/advocacy/community-programs/consumer-resources/manage-your-money/understanding-overdraft
Information from FDIC’s "Overdraft and Account Fees" as of May 28, 2025: https://www.fdic.gov/consumer-resource-center/2021-12/overdraft-and-account-fees
Information from CFPB’s "If I link my credit card to my checking account to cover overdrafts, can the bank/credit union charge me a fee each time I use it to cover an overdraft?" as of May 28, 2025: https://www.consumerfinance.gov/ask-cfpb/if-i-link-my-credit-card-to-my-checking-account-to-cover-overdrafts-can-the-bankcredit-union-charge-me-a-fee-each-time-i-use-it-to-cover-an-overdraft-en-1049/
Information from CFPB’s "Data Spotlight: Credit card cash advance fees spike after legalization of sports gambling" as of May 28, 2025: https://www.consumerfinance.gov/data-research/research-reports/data-spotlight-credit-card-cash-advance-fees-spike-after-legalization-of-sports-gambling/
Information from HelpWithMyBank.gov’s "What is overdraft protection?" As of May 28, 2025: https://www.helpwithmybank.gov/help-topics/bank-accounts/nsf-fees-overdraft-protection/overdraft-protection-programs/overdraft-protection.html
Third-party trademarks referenced for informational purposes only; no endorsements implied.
Information from American Bankers Association's "Overdraft fee income is on the rise at these big banks" as of Jan 9, 2026: https://www.americanbanker.com/news/overdraft-fee-income-is-on-the-rise-at-these-big-banks
SpotMe® on Credit is an optional, no interest/no fee overdraft line of credit tied to the Secured Deposit Account. SpotMe on Debit is an optional, no fee service attached to your Chime Checking Account (individually or collectively, "SpotMe"). Eligibility for SpotMe requires $200 or more in qualifying direct deposits to your Chime Checking Account each month.
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Chime® is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC.