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Understanding the difference between overdraft coverage and overdraft protection can be confusing, especially when each bank has its own policies in place and federal banking laws are constantly changing. Fortunately, most of these federal laws were passed to help regulate the major banks and to protect consumers. To help you understand what an overdraft is and what fees you may or may not be responsible for, we break down everything you need to know, as well as detail which major banks allow you to use a credit card for overdraft protection.

What is an overdraft?

An overdraft occurs when your bank account balance, typically a checking or savings account, becomes negative as a result of insufficient funds. Normally, because of the way banks operate nowadays, this shouldn’t happen. Instead, your check, ATM withdrawal or debit card transaction would just be declined or returned because the account doesn’t have enough funds to cover the transactions. That is, of course, unless you’ve decided to opt in for overdraft coverage. If you do have overdraft coverage enabled, your account would be overdrawn whenever your account balance isn’t enough to cover any of your transactions, and you would then be responsible for paying the overdraft and insufficient funds fees charged by your bank.

What is overdraft coverage?

Because of newer federal laws, major banks can no longer automatically enroll customers in overdraft coverage, causing their accounts to overdraft and become negative and resulting in some hefty overdraft fees. Instead, customers have the choice of whether or not they want to opt in for this type of coverage. This is due to two major laws. This first of which is the Dodd-Frank Wall Street Reform and Consumer Protection Act, which President Obama signed in 2008 following the financial crisis on Wall Street. Dodd-Frank prevents mortgage lenders and payday lenders from taking advantage of consumers, and it also provides consumers protection from their banks. Under Dodd-Frank, a checking or savings account must automatically reject or reverse a transaction if the account has insufficient funds to cover an ATM withdrawal, a recurring payment or a merchant transaction. Before this law was put into effect, the majority of banks would automatically overdraft their customers’ accounts by enrolling them in overdraft coverage without giving them the option to opt in by choice. Now, customers are automatically opted-out of overdraft coverage, and given the choice of whether they want to enroll or not.

Another law that was passed to help protect consumers from banks and excessive fees is the Overdraft Protection Act of 2013, which helps to not only give consumers the option of whether they want overdraft coverage, but also ensures that banks clearly disclose their overdraft policies and fees to customers. To be clear, customers who opt in for overdraft coverage can still overdraw their account and obtain overdraft fees, but they must be given information about these fees and policies at the time they opt in.

In terms of fees, most major banks in the U.S., such as Capital One, Chase, Discover Bank, Wells Fargo and Bank of America, charge around $35 in overdraft fees per item on things like returned checks and non-sufficient funds on a debit card transaction. It’s important to note that there are specific rules surrounding overdraft fees, and that these rules vary by bank. Capital One, for example, won’t charge you more than four overdraft fees per day, and the same goes for Wells Fargo. This means if you have five transactions that overdraw your account, you will only have to pay overdraft fees for four of them (e.g., one $20 charge, one $15 charge, one $25 charge, one $17 charge and one $6 charge will result in a total of $140 in overdraft fees — a $35 overdraft fee for four of the transactions). With Wells Fargo, you do have the option to make a deposit before the posted cutoff time on the same business day if your account is negative, so that you will not be charged this fee because their transactions post overnight.

Something to also be aware of is that some banks have a maximum dollar amount you must spend to be charged the fee, as detailed by the FDIC. For example, Capital One has a $5 rule, which means you won’t be charged a fee for one transaction that overdrafts your account by $5, but you will be charged for multiple overdrafts that total $5 or more. If you’re ever in doubt about what your bank charges for overdraft and insufficient funds, you should contact a customer service representative to confirm before you decide if you really want to opt in for overdraft coverage or not.

What is overdraft protection?

If you don’t want your account to become negative (but you want the bank to cover the transaction) and you also want to avoid paying overdraft fees, overdraft protection is the way to go. Most banks have a service called overdraft protection that links a savings account or a second checking account to your normal checking account. When you overspend with a check, ATM withdrawal or debit card transaction, the bank will automatically transfer funds from the connected account to cover the insufficient funds.

Which banks allow you to use a credit card for overdraft protection?

Of the major banks we looked at and listed above, Bank of America is the only one that allow customers to link a bank-issued credit card to help cover expenses in the event that their checking or savings account doesn’t have enough money to cover a transaction. Not only do credit cards add a layer of protection to your checking or savings account, but some also offer pretty great rewards on purchases as well as other perks, which means they’re good additions to your wallet. If you currently bank at Bank of America and don’t have a credit card for overdraft protection, keep reading to see our top credit card picks for you.

Best credit cards for Bank of America customers

BankAmericard Cash Rewards Credit Card

Bank of America customers looking for a credit card to use for overdraft protection will want to consider the BankAmericard Cash Rewards Credit Card. This card features a generous 0% intro APR period for 12 billing cycles on purchases and balance transfers made in the first 60 days (with a 3% balance transfer fee), as well as some great cash back rewards. You’ll receive 3% cash back at gas stations, 2% cash back at wholesale clubs and grocery stores (on up to $2,500 per quarter in combined gas, wholesale club and grocery store purchases) and 1% cash back on all other purchases. Plus, if you spend $500 in the first 90 days, you’ll receive a $100 bonus! You’ll never have to pay an annual fee with this credit card, and Bank of America customers will also enjoy an ongoing 10% cash reward bonus — Gold, Platinum and Platinum Honors customers will earn a bonus of 25% to 75% — whenever you redeem your cash back rewards into a Bank of America checking or savings account.

BankAmericard Travel Rewards Credit Card

If you’re a Bank of America customer who’s also a frequent traveler, the BankAmericard Travel Rewards Credit Card is an excellent option to use for overdraft protection. With this card, you’ll enjoy a 0% intro APR for 12 billing cycles on purchases as well as 1.5 points for every $1 you spend on all purchases. And if you spend $1,000 on purchases in the first 90 days, you’ll automatically receive 20,000 bonus points — that’s worth $200 in statement credit toward travel purchases! There’s no annual fee associated with this card, and similar to the BankAmericard Cash Rewards Credit Card we mentioned above, Bank of America customers with a qualifying account can earn an additional bonus points every time they redeem.

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Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.