Chase Changes Overdraft Policy: No Credit Cards for Backup Funding

Linking a checking account to a credit card to provide a cushion in case of an overdraft is a time-honored tradition in consumer banking, but Chase is taking a new approach.

Starting Aug. 20, a Chase credit card can no longer be used to provide overdraft protection for a personal checking account. Only a Chase savings account can be linked to a personal checking account to provide that backup funding.

So what happens if Chase checking account holders overdraw their accounts and don’t have a Chase savings account?

It means that Chase checking account holders might have more declined transactions and might incur insufficient funds and returned item fees.

Using money from a savings account instead of a credit card to cover overdrafts might seem more fiscally responsible, because consumers are using money they already have. They aren’t borrowing money, which, in turn, could help them avoid interest charges on money transferred from a credit card.

But some consumers on social media don’t seem happy about the change.

Chase also said it will no longer charge a $10 fee to transfer the money.

Chase said most customers enrolled in overdraft protection already have their personal checking accounts linked to a savings account, and that, in a six-month period, the bank has seen only 1.5 percent of overdraft protections go to a credit card.