Opposing the privilege

There is no guarantee by the bank that your check will be paid. Bounce-protection plans typically limit the amount by which you can overdraw your account to somewhere between $100 and $1,000. If the overdraft exceeds that, the bank may decide not to pay the check.

And most bounce-protection plans require the overdraft and fees to be repaid within 30 days, sometimes even less, maybe two weeks. After that, the bank may send your account to a collection agency.

You can expect to be charged the bank's standard NSF fee plus a daily fee of anywhere from $2 to $10 until the account is brought into balance.

Example: Suppose you overdraw your account by $100 and it takes you 10 days to repay. If your bank charges a $35 NSF fee, plus $5 per day, you're stuck for $85 in fees on the $100 that you, essentially, borrowed from your bank for 10 days. It's easy to see why consumer groups say bounce protection amounts to short-term, high-cost credit, payday lending by banks.

Another problem with this type of coverage is that some banks include your bounce-protection limit when you do a balance inquiry by phone or ATM. If you have $300 in your checking account and you have a bounce-protection limit of $100, your balance could show $400. There may be some indication that $100 is bounce protection, but an unsuspecting customer could easily spend more than their true $300 balance and trigger an overdraft.

Denying automatic protection

Up next, chronic check bouncers can find themselves blacklisted from getting a checking account. You'll see why you don't want your name to be found in ChexSystems.