The Update

Should I Sign Up for Overdraft Protection (POPS)

Overdraft protection (POPS) can keep your account from landing in the red, but there can be disadvantages, too. Let’s take a closer look at this popular checking account feature so you can make an informed decision before signing up.

What is POPS?

POPS (Periodic Overdraft Protection Service) is a service offered by credit unions that allows you to complete transactions even when you don’t have enough money in your account. When you sign up for overdraft protection, the financial institution covers the shortfall, typically by linking to another account you own or by extending automatic coverage that must be repaid with a fee.

The Cost of Convenience

Overdraft protection ensures your transactions go through. However, this convenience comes at a price. Many banks and some credit unions charge an overdraft fee each time the service is used. If you continue making small purchases, you could incur multiple fees before you realize there’s an issue.

Encouraging Poor Financial Habits

When you know your purchases are covered, you may be less careful in monitoring your account balance and managing your finances. This can lead to dependency on overdraft protection.

Should I Choose POPS? 

Overdraft protection may be a good option for you if your financial institution offers it for no or a low fee. However, you may want to institute these practices so you rarely have to use this feature:

• Set up low balance alerts. This can help you avoid accidental overdrafts.
• Link your checking account to a savings account. This way, funds can be transferred automatically to cover shortfalls, often with lower or no fees.
• Maintain a buffer in your checking account. Keeping an extra $100 or $200 in your account can act as a cushion, thus reducing potential overdraft situations.
• Use budgeting tools and apps. This way, you can monitor your spending and ensure you have enough funds to cover your transactions.

Use our guide to learn about overdraft protection and how to use it effectively.

Want More Information on POPS? 

If you'd like to learn more about POPS (Periodic Overdraft Protection Service), stop by your favorite RGCU Branch and we can get  you more information.