What best defines overdraft protection?

• A. A service that prevents transactions from being declined due to insufficient funds.
• B. A benefit that increases your credit limit automatically.
• C. A feature that doubles deposits when balance is high.
• D. A form of savings account with higher interest.

Answer: (A)

Overdraft protection is a service that prevents transactions from being declined due to insufficient funds. It works by linking your checking to another source of funds—like a savings account or a line of credit—and automatically transferring or advancing the needed money to cover the shortfall up to an approved limit. This lets debit purchases, checks, or automatic payments go through even when your balance isn’t enough, saving you the hassle of declined transactions or returned item fees. Keep in mind there can be fees or interest for the borrowed amount, and not all transactions are guaranteed to be covered or available in every situation. It’s not about increasing a credit limit or earning higher interest on savings; it’s a service to cover temporary shortfalls so transactions aren’t rejected.