Overdraft protection: Not a Loan, but a Financial Tool

Overdraft protection is a financial product that has fans and foes. For our listeners who may be unfamiliar with the product, overdraft protection, or courtesy pay as it’s referred to by some credit unions, is a service that covers what is, in effect, a bad check. Overdraft programs, if used correctly, help resolve consumers’ short-term financial problems, but it is not a loan. If you’ve ever bounced a check, you know how expensive that can be. Most merchants will charge a non-sufficient fund fee upwards of $30 per incident. On top of that, the financial institution will also charge you the over drawn fee (or NSF). With overdraft protection, transaction fees vary by institution, but typically range anywhere from $25-$35, saving consumers both the fee from merchants for an insufficient funds check and the NSF from the financial institution. For many people who get cash strapped by unforeseen expenses, the alternative to overdraft protection is predatory lenders. Join host Dick Ensweiler and special guest Carolyn Jordan, senior vice president at Neighborhood Credit Union in Dallas, for this thought-provoking discussion about a product hailed by some as a lifesaver, and opposed by others. The duo will also get to the root of the issue, and that is financial literacy, or the lack thereof.