Overdraft Loan Quiz

Often positively referred to by banks as overdraft protection or privilege, bank overdraft programs are actually short-term loans used to cover the difference if withdrawals (whether by check, electronic debit, or ATM) exceed the current balance in a consumer’s checking account. Automated overdraft programs involve standardized procedures where banks charge account holders a flat fee (averaging $34) for each overdraft, regardless of the amount overdrawn or how quickly it is paid back. These practices often make bank overdraft programs more costly than other forms of credit and put consumers further in the hole.

1. Only about half of all banks have overdraft programs.

2. Banks do not have to ask your permission to enroll you in an overdraft program for checks or automatic bill payments that may overdraft your account.

3. How many banks offer inexpensive alternatives to overdraft programs?

4. Because overdraft protection is a type of credit, banks consider ability to repay when charging overdraft fees.

5. What percentage of banks accept ATM or debit card transactions on overdrawn accounts?

6. Banks process transactions in the order that the transactions were made, meaning that the transactions made in the morning are processed before those made in the afternoon.

7. The average amount of money that a customer who has 20 or more overdrafts a year pays is…

For more information on this topic, see the list of references.