Which type of credit is typically the most expensive?

Overdraft protection is considered the most expensive type of credit because it often comes with high fees and interest rates. When a transaction exceeds the balance in an account, the bank covers the shortfall, but they typically charge a fee for this service, which can be substantial. Additionally, if the overdraft amount is not paid back promptly, interest charges can accrue quickly, compounding the cost of borrowing. This makes overdraft protection a particularly costly form of credit for consumers, especially when compared to other types of borrowing options, which might have lower fees and rates associated with them.

In contrast, unsecured personal lines of credit, secured personal lines of credit, and home-equity lines of credit generally offer more favorable rates because they either provide collateral or lower risk to the lender. For example, secured credit typically involves collateral, reducing the lender's risk and resulting in lower interest costs. Home-equity lines of credit leverage the borrower's home value, usually resulting in lower rates than unsecured lines or overdrafts. Thus, while all these options can have costs, overdraft protection stands out as particularly expensive due to its fee structure and potential interest accumulation.