Final answer:
Automatic overdraft protection is backed by a share account for individuals and a line of credit for businesses. The NCUA and FDIC provide further safeguards for depositors in the event of a financial institution's failure.
Step-by-step explanation:
Automatic overdraft protection is typically a service provided by financial institutions to prevent checks or other withdrawals from bouncing when the balance is not sufficient. This service is backed by different mechanisms depending on the type of overdraft protection in place.
Automatic overdraft protection is backed by the share account for individuals, providing a safety net by transferring funds from a savings or other deposit account to cover the shortfall. On the other hand, a line of credit serves as the backing for businesses, offering a borrowed amount of money that can be used when the account balance falls below zero, up to a certain limit.
In the event of a bank failure, both credit union members and bank customers have a layer of protection through agencies like the National Credit Union Administration (NCUA) and the Federal Deposit Insurance Corporation (FDIC), respectively.
The FDIC provides deposit insurance up to $250,000 per depositor, per insured bank, for each account ownership category, fostering confidence and stability in the financial system.