Digital News Report – The new rules from the Federal Reserve Board is now in effect regarding the ‘opt in’ to participate in the overdraft program for consumers that had existing accounts with the financial institutions. Previously banks would automatically enroll you into the overdraft program and if your checking account would run out of funds they still approve payment, but at the same time charge a fee for the service. People with debit cards would go around making many small purchases and would rack up large overdraft fees from many small transactions. While overdraft protection could be helpful for people pay bills on time, there is a high risk for debit card users racking up a lot of hefty overdraft fees.
If you are not opted in to the overdraft protection your debit card transaction could be declined if you don’t have enough money to cover the payment. While that sounds like a bad thing, it might be a good thing. For example, if you used a debit card for a $5 purchase and it gains you a $35 overdraft fee because it was approved could be frustrating. It could be especially maddening if you didn’t know you went over your account balance and bought several small purchases racking up an overdraft fee for each transaction.
On the other hand it could be a good thing to have overdraft fee protection. For example, you are wanting to make sure your bills are paid on time and you need the bank to approve the payment. In this case, it could be a benefit to participate in the overdraft protection program.
The FDIC wants banks to let repeat overdraft fee offenders educate them on other alternatives to paying for their shortcomings. The government agency saw an almost doubling in the amount of overdrafts from 2008 to 2009. The FDIC wants consumers to be wiser with their finances.
By: Victoria Brown