Majority of financial institutions - banks, savings and loans and credit unions offer their customers "courtesy overdraft-protection" and "bounce coverage" plans. This should be of a major interest to all consumers who value their credit score.
The idea is that your checks do not bounce, or your debit card, or ATM transactions go through, despite your account having no funds, or insufficient funds.
When you enroll in one of these plans, you will avoid the merchant’s returned-check fee and will stay in good credit standing with the people you transact in your business with. More importantly, you won't be reported to credit bureaus.
However, you still will have to pay an overdraft fee or a bounce coverage fee to the bank for each check or transaction that have not been covered by the deposited funds.
What's the cost of these courtesy overdraft-protection, or bounce coverage, plans to you, the customer?
There are different plans, depending on the account holding institution. However, most banks charge a flat fee between $25 and $35 for each item that used the cover, to make the payment go through. It's a standard practice to set a dollar limit on the total amount your account may be overdrawn. Typically, your bank will cover overdrafts up to a total of $500. But, that's not the end of penalty payments. You'll also be charged for each day your account is overdrawn (about $5). Yes, it all adds up, but the alternative would be to be reported to credit bureaus, with your credit score negatively affected.
