New Rules To Protect Against Overdraft Fees

Starting today, you’ve got more protection against God-awful overdraft fees. 

Overdraft occurs when you write a check, make an ATM transaction, use your debit card to make a purchase, or make an automatic bill payment or other electronic payment for an amount greater than the balance in your checking account.

Banks can charge anywhere from $20 to $30 for EACH overdraft.  Most banks have overdraft protection plans.  But  most are cumbersome, hard to understand, and designed to make the bank money.

Starting today, you’re soon likely to get a notice from your bank giving you the choice of new options for overdraft protection.  It’ll look something like this.

According to the Federal Reserve, this what you need to know:

• You choose. In the past, some banks automatically enrolled you in their standard overdraft practices for all types of transactions when you opened an account. Under the new rules, your bank must first get your permission to apply its standard overdraft practices to everyday debit card and ATM transactions before you can be charged overdraft fees. To grant this permission, you will need to respond to the notice and opt in (agree).
• Existing accounts. If you do not opt in (agree), beginning August 15, 2010, your bank’s standard overdraft practices won’t apply to your everyday debit card and ATM transactions. These transactions typically will be declined when you don’t have enough money in your account, but you will not be charged overdraft fees.
• New accounts. If you open a new account on or after July 1, 2010, your bank cannot charge you overdraft fees for everyday debit card and ATM transactions unless you opt in. If you open a new account before July 1, 2010, your bank will treat you as an existing account holder: you will receive a notice about your bank’s standard overdraft practices and will have to decide if you want them for everyday debit card and ATM transactions.
• Flexibility. Whatever your decision, the new overdraft rules give you flexibility. If you opt in, you can cancel at any time. If you do not opt in, you can do so later.
• Checks and automatic bill payments. The new rules do not cover checks or automatic bill payments that you may have set up for paying bills such as your mortgage, rent, or utilities. Your bank may still automatically enroll you in their standard overdraft practices for these types of transactions. If you do not want your bank’s standard overdraft practices in these instances, talk to your bank; you may or may not have the option to cancel.

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