BORROWING / OVERDRAFT
Understand overdraft costs and limits
Separate borrowing, fees and returned payments, with a simple cost illustration.
Editorial review: October 3, 2026 · Published by Oleksand Tsygan
Overdraft is borrowing, not extra savings
Overdraft protection can allow an account transaction to take the balance below zero under an agreed arrangement. FCAC’s overdraft guide describes basic and linked-account arrangements, costs and conditions. Availability is subject to the provider’s terms; it is not automatic for every account.
Read the credit limit, interest calculation and service charge separately. A monthly charge may apply under a plan even when a particular example of borrowing looks small. Ask which charges apply in your actual situation.
Distinguish four situations
- A positive available balance: funds the provider identifies as available for the transaction.
- Approved overdraft: borrowing permitted within the arrangement’s limit and conditions.
- A returned payment: a transaction that is not completed because the required funds or conditions are absent.
- A fee dispute: a separate question about which charge or rule the provider applied.
These situations can have different consequences. Seeing an account below zero does not, on its own, establish that you had approved protection or that every pending payment will be accepted.
A hypothetical short borrowing example
Borrowing $200 for 10 days at a hypothetical simple annual rate of 20%, using a 365-day year, gives approximately $1.10 interest: $200 × 0.20 × 10 ÷ 365.
If an invented $5 service charge also applies, those two components total about $6.10. This is not a Servus price or a prediction. Real calculation methods, balances, fees and repayment conditions may differ.
The example shows why the interest figure alone is an incomplete cost comparison. Compare the total applicable charges over the period you expect to use the arrangement.
Questions to ask before using it
- What is the approved limit and which transactions can use it?
- How is interest calculated and when is it charged?
- Is there a monthly or per-use fee?
- How must the negative balance be repaid?
- What happens at the limit or if a condition is breached?
- Does the arrangement affect another linked account?
Record the answers from the dated agreement. Do not apply rules about federally regulated banks to an Alberta credit union without verifying the applicable framework.
Look for the underlying timing problem
If a debit regularly arrives before income, map the dates using the payment guide. Ask the payer or biller whether timing can be changed, and confirm any agreement before relying on it. Repeated borrowing may reflect a timing gap or a wider budget shortfall; this article cannot assess which applies to you.
Checked October 3, 2026. Source: linked FCAC overdraft guide. Examples and review questions are original educational material.