What it is

Overdraft Protection is a suite of services that automatically covers qualifying transactions when there are insufficient funds in your primary checking account. Instead of having payments rejected or checks returned, Merchants Bank can transfer funds from a linked source or advance credit to cover the shortfall. The program is designed to be predictable, transparent, and customizable so customers can choose the solution that best matches their cash flow patterns.

Key features

• Linked account transfers: Automatically move funds from a designated savings account, money market, or secondary checking account to cover overdrafts.
• Overdraft line of credit: Access a pre-approved line of credit to cover occasional shortfalls, with interest charged only on the amount borrowed.
• Daily protection limit: Choose a protection limit that controls how much coverage is available to prevent excessive indebtedness.
• Real-time management: Monitor transfers, advances, and balances through digital banking, alerts, and monthly statements.
• Customizable alerts: Receive SMS or email notifications when balances fall below thresholds, when coverage is used, and when repayment is due.
• Grace periods and repayment terms: Enjoy defined grace periods and clear repayment timelines for advances to avoid surprises.

Benefits for account holders

• Avoid declined transactions: Maintain payment continuity for recurring bills, purchases, and essential expenses.
• Protect your reputation: Prevent returned checks and declined merchant payments that can damage credit relationships.
• Reduce late fees: Cover important payments on time to avoid late penalties from billers or service providers.
• Greater financial confidence: Smooth out temporary cash flow gaps caused by unpredictable income or timing mismatches.
• Cost control: Select the most cost-effective protection option—linked internal transfers typically avoid interest, while lines of credit charge interest but preserve savings balances.

How it works

1. Enrollment: Choose the preferred overdraft protection method during account opening or enroll later via online banking, mobile app, or at a branch.
2. Transaction trigger: When a transaction would overdraw the checking account, the bank evaluates available protection options in the order you’ve authorized.
3. Automatic coverage: Funds are transferred from a linked account or a line of credit is advanced to cover the shortfall, up to the approved limit.
4. Notification: You receive an alert detailing the transaction, the coverage used, and any applicable fees or interest.
5. Repayment: For advances, repayment occurs automatically through deposit sweep or according to the terms of your line of credit; linked transfers remain part of your own funds.

Fees and costs

Merchants Bank provides transparent fee structures so customers can compare options:

• Linked account transfers: Often the most economical option with a small transfer fee or no fee depending on account type.
• Overdraft line of credit: Interest is charged on the outstanding advance at the disclosed annual rate; there may be no per-item overdraft fee.
• Per-item overdraft fees: If overdraft protection is not in place, standard overdraft fees may apply for paid items and returned items.
• Maximum daily fees: Fee caps are applied to limit the total daily cost for multiple overdraft items in many cases.

Exact fees and annual percentage rates vary by product and customer eligibility. Terms are provided at enrollment and on account disclosures.

Eligibility and requirements

To qualify for overdraft protection, customers generally need an eligible consumer checking account in good standing. Documentation and a credit review may be required for overdraft lines of credit. Linked accounts must be owned by the same customer and properly titled. Merchants Bank offers options for both individual and joint account owners.

Smart practices for using overdraft protection

• Set up low-balance alerts to avoid relying on overdraft services when possible.
• Link a liquid savings account for economical transfer protection.
• Use an overdraft line of credit for predictable short-term cash needs and to preserve emergency savings.
• Review monthly statements and transaction history to spot recurring overdraft patterns and address underlying cash flow issues.
• Adjust protection limits as your financial situation changes to balance convenience and cost.

Frequently asked questions

Will every transaction be covered?

Coverage applies to qualifying transactions up to the authorized limit and according to your chosen protection method. Some types of transactions may be excluded by policy.

Can I opt out?

Yes. Enrollment is optional and you can change your protection settings at any time. Opting out removes automatic coverage and increases the chance of declined transactions.

How quickly are transfers or advances processed?

Protection actions occur in real time or near real time when a transaction is presented, minimizing interruptions to payments and purchases.