Previously, if someone didn’t have enough available funds in their checking account to cover a $4 cup of coffee, the bank could automatically enroll them in overdraft protection. The bank would honor the $4 charge, but then could charge the customer a $35 overdraft protection fee, making that $4 cup of coffee a $39 cup of coffee. Customers didn’t have to opt in for the overdraft protection coverage, and they would be slapped with hefty fees without their prior consent. All of that is in the process of changing, however.
As of July 1st, banks are now required to get new customers’ permission before enrolling them in overdraft protection and charging fees to cover debit card and ATM overdrafts. Effective August 15th, existing bank customers will have to opt-in before banks can charge them fees for overdraft protection. According to USA Today, overdraft protection and insufficient fund fees generated an estimated $38.5 billion for banks in 2009. That’s a lot of fees paid when the solution for the customer may have just been as simple as using another form of payment.
Each bank seems to be responding to the new rules differently. For example, Bank of America indicated it will no longer charge overdraft fees on debit card purchases. ING Direct is instead pushing an overdraft line of credit. U.S. Bancorp lowered overdraft fees to $10 for overdraft transactions of $10 or less, which is down from a fee of $19 to $37.50 per transaction.
Some banks, like Bank of America, also offer payment alerts via email or text message that can let you know when your account balance drops below a level you set. If you monitor your check book diligently and carry back up cards, most people shouldn’t need to opt in for the overdraft protection.
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