Overdraft Protection

“Jenny usually gets paid on Thursdays by cheque and she knows that her mortgage payment comes out of her chequing account by direct debit on Fridays. When Jenny is unable to deposit her cheque Thursday afternoon, she realizes her account does not have the funds to cover her mortgage payment. Luckily, she has Overdraft Protection on her chequing account, so when her mortgage payment comes out of her account Friday morning, her chequing account shows that she is in the negative but not in unauthorized overdraft. When she deposits her cheque on Friday, her account is once again brought into the positive and she does not owe unauthorized overdraft fees from her banking institution, but a small amount of interest for the time that she was in the negative.”

“Robert’s chequing account is running low these days. He has all of his utility bills set up for pre-authorized debits, so they come out of his chequing at the same time every month. Robert lost track of time and received a notification that his chequing account went into unauthorized overdraft due to his hydro bill coming out. As he doesn’t have Overdraft Protection, and he cannot transfer funds into his account immediately, the payment must be sent back by his financial institution. This results in a fee of $50, and a fee from the hydro company for being late on his payment. This also reflects poorly on his credit report.”