What is "overdraft protection" and how does it work?

What is "overdraft protection" and how does it work?

Mitchell Freedman, CPA/PFS (CEO, MFAC Financial Advisors) gives expert video advice on: What kinds of bank accounts should I have?; How do I open a bank account?; How can I compare banks and the services they offer? and more...

A tool that some people can use is called overdraft protection. And overdraft protection is to have a line of credit that is unused, but in the event you write a check, inadvertently or deliberately, for more than is in the account this line of credit will automatically populate money into the account so that your account is not overdrawn. Of course there is no free lunch with overdraft protection. There will be an interest charge and possibly even a transaction fee for overdraft protection when money is drawn down from that line of credit into the checking account to cover the overdraft.