What is Overdraft Protection?

Overdraft protection is a linked service that provides a temporary source of funds when your primary deposit account does not have enough available balance to pay an authorized transaction. It is intended as a safeguard to cover short-term shortfalls arising from checks, automated clearing house (ACH) debits, electronic bill payments, debit card purchases, and automatic transfers, depending on the program options and account type.

Key Features

• Linking options: Customers can typically link a savings account, secondary checking account, credit line, or a designated overdraft line of credit to automatically cover overdrafts.
• Automatic transfers: When a transaction would overdraw the account, funds are automatically transferred from the linked source to cover the shortfall, subject to limits and availability.
• Transaction coverage choices: Enrollment may allow coverage for ATM and everyday debit card transactions in addition to checks and ACH transactions, depending on customer preference and regulatory permissions.
• One-time or recurring protection: Protection can work on a transaction-by-transaction basis and may include a limit on the number of overdrafts or total covered amount.
• Notifications and alerts: Customers receive alerts when overdraft protection is used, including information about amounts covered and any associated fees or repayment requirements.

How It Works

If a posted transaction exceeds your available balance, the overdraft protection program assesses whether a linked account or credit resource can cover the shortfall. When coverage is available, funds are transferred automatically or a credit is extended to complete the transaction. The covered amount and any applicable fees are reflected on your account statement. If no protection is available or the linked source lacks sufficient funds, the bank's standard overdraft policy determines whether the transaction is returned or paid, and what fees, if any, apply.

Benefits

• Prevents declined transactions that can be inconvenient or embarrassing at the point of sale.
• Helps avoid merchant returned-item fees and potential disruptions to recurring payments such as utilities or loan payments.
• Provides short-term liquidity to cover unexpected timing gaps between deposits and payments.
• Offers flexible linking options to use funds from savings, another account, or a line of credit.
• Promotes financial control through alerts and consolidated reporting of overdraft activity.

Eligibility and Enrollment

Eligibility typically depends on account type, customer relationship history, and applicable terms and conditions. To enroll, customers usually review and accept the overdraft options available for their accounts, specifying which linked accounts or credit products should be used. Enrollment choices and availability of coverage for different transaction types may be governed by regulatory rules and bank policies. Customers are encouraged to review disclosures carefully and select the option that best matches their needs and risk tolerance.

Cost and Transparency

Overdraft protection may involve fees or finance charges, especially when a line of credit is used to cover an overdraft. Fee structures vary by product and account, and may include a per-item charge, a transfer fee, or interest on borrowed amounts. First Horizon National Corporation provides disclosures outlining applicable fees and how they are assessed. Customers should review these materials before enrolling and monitor their account statements for any charges related to overdraft coverage.

Limitations and Important Considerations

• Coverage is subject to the availability of funds in the linked source at the time of the transaction.
• Using overdraft protection does not replace sound budgeting practices — repeated reliance can result in fees or credit costs and may indicate the need for alternative solutions.
• Regulatory protections may limit the coverage of ATM and everyday debit card transactions unless you specifically opt in to that coverage.
• Bank policies determine the order of processing transactions, which can affect the number of overdrafts and fees assessed in a single day.

Managing and Avoiding Overdrafts

Customers can take practical steps to minimize overdrafts and control costs:

• Enroll in account alerts that notify you when balances fall below a set threshold.
• Link a secondary account or set up a low-cost transfer option to act as a buffer.
• Maintain a small emergency balance to cover timing gaps between deposits and payments.
• Review recurring payments and adjust timing where possible to align with deposits.
• Consider a modest overdraft line of credit as a less expensive alternative to per-item overdraft fees.

Frequently Asked Questions

Will my debit card purchases be covered automatically?

Coverage for debit card and ATM transactions depends on the choices you make when you enroll and on regulatory options. You must opt in for certain everyday debit card protections in many cases. Review enrollment materials to confirm coverage.

Are there limits on how much can be covered?

Yes. Coverage limits are determined by the type of linked source (for example, account balance or approved credit limit) and by bank policy. Transactions that exceed those limits may be declined or returned.

How will I know if my overdraft request was covered?

The bank typically sends notifications, posts notes to your account statement, and may provide online or mobile alerts indicating the amount covered and any fees assessed.