A comparison of an overdraft line of
credit and a "bounced-check protection" plan.
| Overdraft
line of credit | "Bounced-check
protection" program |
| Written agreement |
No written agreement |
| Bank
obligated to pay overdraft. No discretion. While bank may not pay if fraud is
suspected, threshold is higher because of contract and liability for failure to
pay. | Bank retains discretion to pay or return any overdraft.
Threshold for not paying due to fraud suspicions is lower. |
| Potential bank liability for failure to pay overdraft |
No liability
for failure to pay overdraft. |
| Overdraft
may be repaid over time and in installments. | Entire overdraft
must be repaid in short period. |
| Consumer
must meet creditworthiness standard to obtain product. | Consumer
need only meet eligibility standard for opening the account. |
| Interest charged for overdrafts. May be per item,
application or annual fee. |
Flat per-item overdraft fee, unrelated to the
amount of the overdraft. |
