We’ve all been there. You swipe your debit card for a skinny latte, your transaction goes through, and you never think about it – until suddenly your bank statement includes hefty overdraft fees. Banks often tell customers they’re enrolling them in “overdraft protection,” meaning that the bank will pay for debit transactions even when checking accounts are empty. But for many consumers, it’s not protection at all – it’s a horrible trap of fees that add up to much more than that stupid $3 latte. Why doesn’t your card get denied if you don’t have enough money? Isn’t that the most logical thing?
According to The Huffington Post, that will now be an option. Banks will have to secure their customers’ consent before charging large overdraft fees on ATM and debit card transactions, according to a new rule announced today by the Federal Reserve.
Under the new rule, which will take effect July 1, banks will be required to notify new and existing customers of their overdraft services and give customers the option of being covered. If customers don’t “opt in,” any debit or ATM transactions that overdraw their accounts will be denied, Fed officials said.
Banks earn as much as $25 billion to $38 billion annually from overdraft fees, Fed officials said, but that total includes check overdrafts. No wonder they keep selling these programs to us as “protection!” I’m glad they won’t be able to get away with it so easily now.
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Comments
hi
November 12th, 2009 - 11:53:18 AM
i went to the bank to opt out of "overdraft protection" awhile back. i said the same as you, that i wanted my card to get declined if i don't have money on it. they complied but the problem after that begins when the weekend hits. say you have $50 in your account on friday and charge $40 on saturday. the charge doesn't go through until monday. so then you can charge another $40 on sunday because as far as the bank is concerned you still have $50 in your account. then on monday, you have negative funds and even more of a fee than overdraft would have provided. along with this new rule they need to track funds over the weekend. how difficult could it possibly be.
1
Kat Ahn
November 12th, 2009 - 12:18:09 PM
I'm just glad that the Fed is taking action on this. Overdraft fees/Overdraft protection= highway robbery
2
mindy
November 12th, 2009 - 12:29:27 PM
how banks complete transactions are also designed to screw you over. for example, let's say you have $880 in your bank account and you purchase s $3 latte, a $6 lunch and pay your $900 rent, all on the same day, and all in that order. The bank will process the biggest item first (the rent), immediately putting you in debt, which results in three over draft fees (one for the rent, one for the latte, and one for lunch). Whereas if the bank charged you in order, you would have only been charged an overdraft fee once, when you paid your rent (as you had the money for the latte and lunch). Basically: banks suck.
3