You probably received a notification from your bank within the past few weeks inviting you to opt-in on debit card transactions that exceed your balance. We used to call those overdrafts but I guess that’s not cool any more. In any case, here’s the deal………..Banks have historically allowed small dollar overdrafts on ATM or debit card transactions. For example, you are at a restaurant with friends and your debit card is rejected because you forgot to make a deposit and your account balance is insufficient to pay the bill. The bank allows the overdraft to go through and even though it is expensive to do so, the consumer sees some value in not having ask one of their friends to pick up their portion of the tab. The charges around $25 – $30 to pay this charge through. You could argue both sides in terms of whether or not this is fair but that’s for another post.
Congress, in their attempt to provide consumer protection, decided banks were making too much off of these fees and that those that were paying them typically were those least able to pay. The answer was to make everyone to perform a one time opt-in prior to allowing their account to be paid over. There is no opt-out option. If you opt in, the bank will continue to pay you into overdraft if necessary but you will also have to continue paying the fees. If you haven’t opted in yet and want to do so your bank likely has a quick way to do so on their website. Mine says “Important! Changes to overdraft service coverage”.
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