What is overdraft protection (ODP)?

Overdraft protection (ODP) is a financial service offered by banks that allows account holders to withdraw more money than they currently have available in their checking accounts, up to a certain limit. This service helps prevent declined transactions and bounced checks, providing a safety net during cash flow shortfalls. Typically, banks charge fees for overdrafts or interest on the amount overdrawn, and some institutions offer linked savings accounts or credit lines as a form of ODP. While ODP can provide convenience, it’s important for users to be aware of the associated costs.