Many people with bad credit cannot get a credit line at a bank that can be linked to a checking account. For those people, getting an overdraft protection plan at a bank may be difficult or impossible. However, it's still possible for customers with bad credit to get overdraft protection at a credit union with Courtesy Pay.
What is Courtesy Pay Overdraft Protection Plan?
Courtesy Pay is a product offered by most credit unions to help their customers avoid bounced checks when their account is overdrawn. It is not a credit line. It is a service that can be discontinued at any time by the credit union.
With Courtesy Pay, the credit union will cover checks when a checking account is overdrawn, up to a specified limit. The limit depends on the credit union but it's often between $750 and $1,000. It is a courtesy. There is no contractual obligation by the credit union to pay check on an overdrawn account, even if it has done so in the past.
There is no charge for having the Courtesy Pay feature unless it is utilized. The fee is typically around $25 to $30 for each check paid by Courtesy Pay. Utilizing this feature can be very expensive, especially if multiple checks are paid. Nevertheless, this feature does save the customer from having to pay even more fees from the business cashing the check, such as a returned check charge.
Courtesy Pay also allows the customer to avoid the embarrassment of a negative entry into ChexSystems, a credit reporting agency that tracks negative activity with deposit accounts. Negative reports to ChexSystems may prevent the customer from opening any more bank or credit union accounts. Keep in mind that there are a few non-ChexSystem banks that offer accounts to those with negative activity on their report.
Requirements for Courtesy Pay Overdraft Protection
There may be other requirements to be eligible for Courtesy Pay, depending on the credit union. For example, the requirements at Western Sun Federal Credit Union are:
- Age 18 or older
- Checking account open for a minimum of 3 months and in good standing
- At least $400 deposited into the checking account every month
- No delinquent loans
- No tax levies
- Account must be at a positive balance at least once every twenty days
Customers should consult with their specific credit union with regards to requirements, obligations, and limits of Courtesy Pay.
Overdraft Protection Using Credit Lines, Credit Cards, or Savings Accounts
Those that need more comprehensive overdraft protection plans can link another credit union account such as a savings account, money market account (not money market mutual funds), or a credit line. A linked account may provide much higher overdraft protection limits than what is available with Courtesy Pay.
Reference:
Western Sun Federal Credit Union. "What is Courtesy Pay?"
