By Mark Huffman
ConsumerAffairs.com
June 21, 2010
Starting July 1, new Federal Reserve rules will prevent banks from automatically charging overdraft fees when debit customers exceed their account balance.
Currently, when a consumer goes into the red, banks automatically honor the purchase but tack on a hefty fee -- usually around $35. Starting next month, banks will not be able to enroll a consumer in this "courtesy" overdraft protection unless the consumer "opts in," specifically agreeing to the coverage.
In addition, some banks have announced they will no longer charge an overdraft fee if a customer's credit card purchase puts them just a few dollars over the limit. Other institutions, like Bank of America, have already discontinued its courtesy overdraft protection, based on customer feedback.
Banks, of course, are hoping many consumers will "opt in" for the continued overdraft coverage, since overdraft fees add up to billions of dollars in revenue for the industry. But as a consumer, you will now have the power to choose.
What you should know
Starting July 1, 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.
This is important because, if you take no action, you will not be granted the overdraft protection, but you will also not be charged overdraft fees. If you do not opt in, beginning August 15, 2010, your bank's standard overdraft practices won't apply to your everyday debit card and ATM transactions, according to the Fed. These transactions typically will be declined when you don't have enough money in your account, but you will not be charged overdraft fees.
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.
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 opt in later.
It's important to remember that 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 its 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.
