Will adding overdraft protection to my checking account result in a HP?

[red259]

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@Anonymous wrote:

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@red259 wrote:

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@Anonymous wrote:

My main banking is through Capital One, and they do a hard pull for their overdraft protection; at least they did in my case. 

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Thanks, maybe what I will do is contact my bank and ask them then. This is something that pops up everytime I log into my account., because the laws were changed years ago so they can't just put you into overdraft protection without your permission. 

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I guess it really also depends on what type of overdraft protection. For instance, Capital One offers the option to automatically transfer the overage amount from savings, which doesn't incur a hard pull, option for them to pay the overage and charge an overdraft fee (like the traditional way), allow no overages at all, or the option to have them cover overages up to a certain amount (for which they charge a nominal interest fee), with the expectation that your next deposit will repay the overage. It's similar to a checking/personal line of credit, except that it takes your account into the negative for the amount(s) over, and pays off with next deposit. That's the one that requires a hard pull.

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It would be the latter since I don't keep a savings account with this bank. I sent a secured message to my bank and just asked them point blank. It would be nice to have the feature but its not essential for me. Just would serve as a safety net, since I usually only move funds into my personal account when I need to make payments from it. 

[Anonymous]

It is a credit application and will result in a hardpull.  The only time it does not result in a hardpull is when the bank / credit union offer it to you on their own through a prequalify.  For example, the overdraft on my checking with a local CU didn't result in a hardpull as I just received a letter asking if I want it or not.  Whereas with NFCU, it was a hardpull.

[sarge12]

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@Anonymous wrote:

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@red259 wrote:

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@Anonymous wrote:

My main banking is through Capital One, and they do a hard pull for their overdraft protection; at least they did in my case. 

---

Thanks, maybe what I will do is contact my bank and ask them then. This is something that pops up everytime I log into my account., because the laws were changed years ago so they can't just put you into overdraft protection without your permission. 

---

I guess it really also depends on what type of overdraft protection. For instance, Capital One offers the option to automatically transfer the overage amount from savings, which doesn't incur a hard pull, option for them to pay the overage and charge an overdraft fee (like the traditional way), allow no overages at all, or the option to have them cover overages up to a certain amount (for which they charge a nominal interest fee), with the expectation that your next deposit will repay the overage. It's similar to a checking/personal line of credit, except that it takes your account into the negative for the amount(s) over, and pays off with next deposit. That's the one that requires a hard pull.

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There are also some like mine that is tied to a CLOC that pretty much lets you write a check over the amount in account against an 8000 dollar line of credit and is then a minimum monthly payment on the loan. That is definately a hard pull. For this it is even an annual hard pull. You can also go online and transfer any amount below the CL into your checking account...8.95% interest rate, which is the same as the CU credit card. There are multiple types of overdraft protections, and the OP would have to ask his bank for the details for the one offered, I'm actually surprised it is not in the fine print on the offer letter.

[red259]

I sent my bank a question where I asked if any sort of inquiry would show on my credit report if I accepted the overdraft protection. Their response was "Overdraft Protection has no bearing on your credit unless the account is sent to collections."

[DeeBee78]

I feel like we need to clarify something for some MyFICOer's sake. Overdraft protection and overdraft line of credit are separate (but related) tools. For the sake of simplicity, let's assume OP is asking about overdraft protection, like their post states. 

Overdraft protection is a feature most banks offer that allows transactions to take you below your balance. Overdraft protection is not a credit product, but simply a service that most banks provide for a nominal fee. Sometimes overdraft protection involves moving funds from another account to cover the overages - checking, savings, credit card, or even (dun, dun, dun) an overdraft line of credit. 

In many cases, each transaction that takes you below your balance incurs a fee. It's all dependent on the bank, and can even be different based on what type of account you use (if any) to cover the overdraft. For example, Wells Fargo used to charge $25 per transaction that overdrafted your checking account, but if you had a savings account setup for overdraft protection, it would only be a $10 fee. 

Capital One 360 offers a dedicated overdraft line of credit (up to $1,000). The approval for this is a HP, since it is a line of credit. There are no fees associated, but interest (around 11% APR) on the overdraft amount accrues immediately. The couple of times I used this, I didn't pay more than $1 in interest. 

If OP would mention their bank, we could provide concrete information. Until then, I'll have to settle for explaining the difference between the two products.

[red259]

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@DeeBee78 wrote:

I feel like we need to clarify something for some MyFICOer's sake. Overdraft protection and overdraft line of credit are separate (but related) tools. For the sake of simplicity, let's assume OP is asking about overdraft protection, like their post states. 

Overdraft protection is a feature most banks offer that allows transactions to take you below your balance. Overdraft protection is not a credit product, but simply a service that most banks provide for a nominal fee. Sometimes overdraft protection involves moving funds from another account to cover the overages - checking, savings, credit card, or even (dun, dun, dun) an overdraft line of credit. 

In many cases, each transaction that takes you below your balance incurs a fee. It's all dependent on the bank, and can even be different based on what type of account you use (if any) to cover the overdraft. For example, Wells Fargo used to charge $25 per transaction that overdrafted your checking account, but if you had a savings account setup for overdraft protection, it would only be a $10 fee. 

Capital One 360 offers a dedicated overdraft line of credit (up to $1,000). The approval for this is a HP, since it is a line of credit. There are no fees associated, but interest (around 11% APR) on the overdraft amount accrues immediately. The couple of times I used this, I didn't pay more than $1 in interest. 

If OP would mention their bank, we could provide concrete information. Until then, I'll have to settle for explaining the difference between the two products.

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It is overdraft protection hence the title of the post. This is not a line of credit. They would charge me an overdraft fee of $35 if I did this.

[Anonymous]

For me it varies ... one bank used the soft pull checking account opening inquiry and offered me an "Over Draft Line of Credit" as part of the process but, when I applied for a "Personal Line of Credit" the same bank did a hard pull (I asked the bank why and they informed me the overdraft line of credit ran through the banking side and the PLOC ran through the credit card side of the bank). A second bank did an HP for the overdraft line of credit. So, for me it was a YMMV.