Pros and Cons of Standard Overdraft Privilege

Pros and Cons of Standard Overdraft Privilege

Whether it’s a mistake balancing your checkbook or an unexpected expense, an overdraft incident happens to almost everyone. Most banks have a standard overdraft service designed to cover you in the case you do not have enough funds in your account. There are mixed views on overdraft privilege services. Let us help clarify.

The pros of overdraft privilege:

  • You only pay for the service if you use it. That is, you pay no upfront or monthly fee to have access to overdraft funds.
  • Offers protection when you need it. In a pinch, the extra funds that overdraft privilege gives can protect against bounced check fees or the frustration of having a debit card transaction declined. 
  • Less expensive than having an item returned. While there is a fee associated with using the service, it’s typically less expensive than paying the fees associated with a bounced check.  

The cons of overdraft privilege:

  • There is a fee when you use the service. While it is a free service offered by many banks, you do pay a fee when you go over your available funds and dip into the overdraft money. The fee is designed to discourage overuse of the service and compensate the bank for the risk incurred. You may want to consider an alternative to the standard overdraft privilege.
  • Overuse can be expensive. If you use it frequently, it can be a costly way of making ends meet. You should reassess your financial situation or look into other options.
  • You may not know when to stop. If you do not monitor your account closely, you may continue to spend into your overdraft cushion. We recommend our clients set balance alerts to help them stay on top of their finances.

The bottom line is that you should explore all the options available to you before deciding whether a standard overdraft privilege is right for you. Questions? Simply contact any Pinnacle office or our Client Service Center at 1.800.264.3613.

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