I'll do the legwork this weekend to send an email. This makes total sense, but I'm sure the banks will fight this with everything they've got.

Halle-freakin-lujah.

My awesome credit union has always declined my debit card if my balance won't cover the charge. I am very grateful for this since I'm awful at balancing my checkbook. It certainly is NOT a convenience to get an overdraft charge.

I had to opt out of my overlimit protection for my Chase cards. Apparently a "limit" isn't really a limit unless you tell them you want it to be. They gave me, we didn't want you to be embarrassed by declining your card. I said "I've used credit and debit cards enough to have them declined due to poor communication lines and other computer errors, so being declined isn't embarrassing.

I am genuinely surprised and refreshed that this is a proposed resolution. Who knew government cared about consumers?

@morganlh85: My credit union's the same way, although they recently sent us a letter requiring us to "opt out" if we wanted the card to behave the same way. I didn't understand why then, though; it's nice of them to give us that option up front.

My overdraft problems never occur when I attempt to spend money with my posted balance already below $0 - it's when the bank manipulates the posting of transactions, regardless of the day the money was spent, so that the largest transactions clear my bank account first, then all of the little ones (which I had money for when I purchased) rack up the fees. I think THAT shit needs to stop first.

In before "you should know how much money is in there, blah blah blah"

I'm against this.

1) More regulation? Seriously?
2) You can't budget your money and not buy things you cant afford? Seriously?
3) This is a big money maker for banks, and with idiots out there over drawing every 10 seconds, it makes all the services like free-checking, and bill payment possible and free to the rest of us.

You take that revenue away from banks, and you'll see all their other services go way up in price.

Also, sometimes emergencies happen, and you need cash. I would feel bad for someone who was denied on a transaction that was critical to have let through because they didn't plan for it. Sometimes over drawing is a life saver.

And low the banks bestowed upon their weary masses a shiny new NSF fee of $35.00.

Don

I have a plan to make sure you never run out of gum. If you pull out a pack and it's empty, I give you a new pack for $35 as a courtesy. You may not opt out. I don't want you to be embarrassed and not have gum. (Also maybe I profit from this)

I'm this close to shredding my debit card anyway. I use it maybe once every couple months when I need cash.

@ltlbbynthn: They don't. They care about cementing their own power.

@mgy: You said regardless of the day, I think you meant regardless of the time of day. Because it is actually illegal to manipulate the date of something posting to your account.

I'm not sure if I agree that this is necessarily in the best interest of the customer. I'd rather pay a $35 fee that have a rent check bounce...

But alas, I don't use a debit card, and I pay attention to how much money I have in my checking account. Not to mention, my overdraft protection is tied to my savings, so I wouldn't see a fee unless both were under the amount written. I guess I'm not the target demographic here.

Overdraft fees are way worse than payday loans. So I would hope that not only do they make overdraft fees opt-in, they also make it so the bank can only charge an interest rate similar to a cash advance on a credit card. I would imagine people would be much less pissed and may actually may use it if an overdraft just counted as a cash advance instead of some ridiculous fee.

yeah, I think that this would be a great thing. nothing like eating at Mcdonalds for $40!

Banking response: The new account sign-up form will have an embedded opt-in agreement.

YES! I generally know how much I have in my account, however on that rare occasion when I may go over by a dollar or two, I would rather just have the purchase (which I most likely do not need) be denied than be charged 32.00 for a toothbrush.

ok, first of all, wtf is up with gawker lately. i have to sign in on every post & comments are getting lost. server migration day?
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anyway, mostly i agree with this. i think banks should definitely require customers to opt-in to courtesy overdrafting on debit cards. i don't think the opt-in/opt-out should occur when the transaction takes place at a merchant - that would require transmission of balance information (which is NOT currently transmitted). considering merchants' general ineptitude at securing your private data - not a good idea.

also, sometimes (regardless of whether you opt-in or opt-out) people overdraft. will this eliminate banks' ability to recover lost funds from people who game the system (e.g. kiters)? if so, as Bladefist indicated - expect free checking, free billpay, free anything to go away completely.

realistically, the bank lobby will tank this, but we should see them back down on some of their least popular practices (such as the "daily overdrawn charge" & credit lines built into debit cards).

@Bladefist: How can anyone with more than one working brain cell not think this is a good thing? You'll still be able to opt in, so you can continue to be pretentious and condescending (in other words, Republican).

Please take your comments and your schnide and go back to Faux News.

But how are the banks going to make their BILLIONS in profits each year?

@mac-phisto: Kiting checks is still illegal in most states. I would think there are other ways to make these folks 'pay.'

And you're saying it's OK for banks to penalize those with less disposable income with these 'convenience' fees, just so I don't lose my no minimum free checking?

If bank A cuts out free checking, whilst bank B across the street keeps it, which bank wins?

@doctor_cos: What's up with the attack, just disagree with the idea. It takes more effort to attack him than the idea. Yes, there's a republican elephant next to his name. I don't like it either, but get over it.

I think this is a good idea. The consumer has the choice (which is what captialism is about, yes?) of whether he wants to pay the overdraft or simply have the transaction denied. And they can make their informed decision and take their chances based o nthat. I'd prefer to have it denied. I have a credit card for emergencies. But some, like Bladefist might want to use it for emergencies or to avoid personal embarassment (besides just being a republican- I kid).

@mac-phisto: Having the same issues as you. I figured they were trying to quiet me :)

@doctor_cos: Woah, you're intelligent AND mature. I don't even get the fox news channel, wish I did. And like I said before, you may opt-out, then have an emergency and be royally screwed.

@ARP: Why you hate my elephant?

Hmm, a fee cascade or slightly blushed cheeks when your Big Gulp purchase is refused.
Lemme think on this...

The only people who seem to be arguing against this are those that want to continue to have the service. Fine then - opt in! Am I missing something?

That said, with all the complaints I see here involving debit cards, why does anyone use them? I don't now have, and never have had, a debit card, and I haven't had an ATM card in 20 years. I already have several credit cards, and I seem to have enough room in my pocket for CASH. In this situation, what benefits does a debit card provide?

There are plenty of banks out there that already offer 'opt-out'. You just have to request it. Most people assume that if their account runs out that the card will stop working, not the case (usually). I'm sure there are some people out there who would actually like to have the option to overdraw their account in an emergency but for 99% of us, the opt-out is great stupidity control.

This is about choice.

Pure and simple.

Financial institutions want to keep this choice from us.

We (some of us at least) want this choice.

Bladefist can make his choice to opt-in to the overdraft/NSF situation.

Everyone else can make their individual choices.

It is interesting that Bladefist uses a selfish argument (free banking for everyone who doesn't overdraw) followed by an altruistic one ('I would feel bad if...[they were] denied on a transaction that was critical").

I think the greater gift to these overdrafters would be to give them the choice of being inundated with NSF fees or not paying $42.50 for the McDonald's happy meal they are buying on their bankcard.

I worked in a bank back in the day in customer service. People often don't understand that while the happy meal caused 1 NSF of its own, it often caused many more items to incur an NSF charge as well. It is common, really common, to have a person call who charged a camera before a pending deposit had cleared. The camera purchase cleared but caused an NSF. Now the account is negative. Now anything that hits the account will get an NSF, and they don't have to pay it to charge the NSF. They can deny the charge and still charge an NSF. I can't tell you how many times I saw that. One main charge followed by gas (+NSF), coffee (+NSF), prescriptions (+NSF), pet food (+NSF), etc. (+NSF). Quickly the deposit is eaten up by the NSFs and the cycle begins again. It usually takes 3 times in a row before the person can get it straight because of how items keep coming in.

Also, keep this in mind. While training for customer service in this bank, one for the biggest in the country, they said, "The customer is always wrong, and you can usually prove it in under 2 1/2 minutes." This was the basic training principle.

@Bladefist: "1) More regulation? Seriously?"

If there was ever an industry that required extensive regulation, it would be the banking industry. It protects consumers, it protects the economy, and it protects the banks.

Otherwise, you have banks run by people who went to the Tony Soprano school of banking. Do you really want that? Seriously? The current trend toward self-policing of various industries (we'll stop screwing our customers/the environment/the government/the troops/etc. when we get tired of it) has gotten us nothing but trouble, and you're actually arguing for more. Incredible!

Choices are a "good thing" no choices are .......

I honestly think it should be an opt-in feature that the bank can advertise as a service if they want. Personally, I would not want to be able to withdraw money I don't have.

The thing I don't understand is why banks need to nickle and dime their customers on fees? My credit union doesn't do this. Pretty much every service I get through them is free, no strings attached. As a matter of fact, they even reimburse ATM charges from machines that I use that are not theirs (so many per month). One year I even got a nice gift of $100 credited to my account because they made more money than they had anticipated and decided to give it back to their members.

This is not a government regulation, but rather a way to tell banks to stop screwing their customers for services they may not want to pay for.

@doctor_cos: realistically, the only way to make them pay is to send them to collections (collection agents generally take a 30% cut) or take them to civil court. here in ct, that's a $35 filing fee just for the judgment. you have to go back (another $35) to get a bank execution or wage attachment (which then has to be serviced by a marshal for ~$50 per service). if a bank is not allowed to charge fees for overdrafting, that means they lose revenue even if they are lucky enough to collect on a judgment. the fees are meant to offset this loss.

& incidentally, even though kiting is illegal, the cops don't usually get involved unless they can get an indictment for grand larceny.

yes, people that overdraft should be conveniencing those that don't - just as those who carry balances on their credit cards enable others to have generous rewards, no annual fees & benefits like extended warranties, travel insurance, etc.

that doesn't mean i think banks should be getting away with their current policy of raking in as many fees as they can. there should be some constraint here & as i stated, banks will most likely begin axing some of their most punishing programs in the interest of halting the legislation.

@Bladefist: "I figured they were trying to quiet me :)"

If your lame-ass arguments weren't so easy to knock down, you'd be more interesting to debate with. As it stands, I can almost predict how you'll respond to any given topic. It is almost as if you have been given a Word document full of talking points from the Institute of Lame-Ass Talking Points, and all you do is copy/paste them. Yawn!

My bank (Fifth Third) introduced a new scheme in January 07 whereby if your UNcleared transactions brought your theoretical balance below zero (not taking into account UNcleared deposits, naturally), you would get charged an overdraft fee for each of those items. Then the uncleared deposits would clear, along with the uncleared withdrawals for which you were charged. So now your statement shows overdraft fees but no day with a negative balance. Under that system, there's no way to determine whether the overdraft fee(s) were actually warranted, even under this new ridiculous system. I could not find any bank employee, in person or on the phone, who could adequately explain to me the mechanics of this system.

I got so sick of this and other revisions to the overdraft system that were purely designed to create overdrafts where before there were none, that I just canceled my debit card and ATM card. Now when I need cash I go to the bank and waste the teller's time with my simple request. Their loss.

Oh, and guess what... I haven't had a single overdraft since then, and I haven't changed anything about the way I manage my money or my spending habits.

I think it either needs to be opt out by default, or warn you that you'll incur a fee for the purchase.

That will prevent the huge fee cascades we can have now either way you like the protection.

@Steaming Pile: that's unnecessary. i don't often agree with bladefist, but he's entitled to his opinion like anyone else. tone it down a notch.

shouldnt overdraft fees go by the same rules as the check cashing crooks.

@mgy: My bank does the exact same thing. They reorder the transactions to make it look like you go into overdaft. What they also do is update their website/phone system at the LAST moment. This goes hand in hand with the fact that they charge you a fee based on how many days you had a negative balance LAST MONTH. They don't tell you WHEN this charge will occur, so you can call in or use an ATM to check the balance and it'll be fine. Then you use the card for something minor and BAM! The fees come in and put you in overdraft again.

This is a good idea because it means the banks have to stop their little tricks to get you to overdraft.

@MyTQuinn: No debit or ATM card? So I assume you either (a) get paid in cash, or (b) go to the teller and withdrawal money? Considering most banks are only open when I'm at work, that's not really an option.

As for the opt-in or opt-out, I could care less. Just give me the ability to do it. If the majority of people won't even bother to check it (which they won't), why the argument for the small minority who will?

Personally this is a pointless rule to put in place. Banks will just make up the difference with other fees. There are banks out there that will charge you for seeing a teller (because of your low average balance of course). These accounts that hit these charges are already the accounts that lose money for banks.

Also read above about banking processing the largest check first then hitting the smaller ones after to try and catch fees. Of course they do it, its how banks stay in business. Its your fault for writing checks without a high enough balance.

What many people fail to see is that those of you with so little money in the banks do not matter. You are for the most part a waste in the banking system and often lose money for the banks. Why should the banks not try and make money from accounts that already provide no profit to even possible losses.

@Steaming Pile: It's just the same with you. I always know how you'll respond. I'm sorry you hate opposing arguments. DailyKos or Huffingtonpost may be better for you. Shield you from opposing points.

Not everything is so black and white in this world.

Our current bank actually only gives overdraft protection ON free checking accounts. After a stupid mistake in the past left me owing a bank $1,000 (over $650 of which was actually NSF fees), I'm more than happy to pay an annual fee for my checking account for the peace of mind that comes from knowing I'm not going to be bent over and violated should I lose track of my funds and overspend for any reason.
I readily admit that the mistake I made in the past was stupid, but I'll be damned if a mistake on my part (stupid or honest) is ever going to help pay for anyone else's bank incentives again.

@infecto: Hey, troll, welcome to Consumerist.
Battered Wife Syndrome for bank customers: who woulda thunk it?

@Bladefist: Wait, what? You start out by saying people should never ever overdraft, then say sometimes it's a lifesaver. Which is it?

@infecto: You are 100% correct. They make money by investing the money in your account, and by the fees they collect from over drafters, and interest off loans. I guess we're both trolls. Trolls that understand how banks work. Unfortunately we haven't been able to find a company that wants to exist and come to work everyday for free.

@mac-phisto: It's just that his comments have no factual basis, consistency or internal logic. But besides that, they're AWEsome! :)

@NotAppealing: I'm saying you be more responsible, be an adult, and not over draft. However, the option is there in case of emergency. IE: You car runs out of gas, you walk 6 miles to the gas station, and oops, you're denied. It would be nice if you have the ability to still get the gas, and pay the fee later.

And to note: I've had friends overdraft, and if you over draft once or twice, you can call the bank and they'll wipe the fee off your account. I've witnessed this many times. So in my gas scenario, you could probably get it erased. If you overdraft 5 times a month, well then you got bigger problems.

@infecto:

What BANKS don't realize is that in a lot of cases, they are likely to lose more money on these "no profit" accounts than they earn from these underhanded fees. Sadly, plenty of people who let themselves get overdrawn are more than willing to let themselves get turned over to a collections agency (and then the bank loses, what, 40%? And that's if the collections agency actually collects the fee).

I've long thought that a bank that offered a built-in high-interest credit line would be much better than this current $30-$40 NSF fee business model. You could make it a 100% interest penalty as soon as the overdraft hits. Pure profit for the bank, and still exponentially less than the standard NSF fee in most cases. Make it a 50% fee, and it's even friendlier for the poor sap who's overdrawn, and still turning a nice profit for the bank. Although I would still opt-out of such a program if given the choice, I would give my custom to such a bank simply because of the more consumer-friendly business model.

@Trai_Dep: More people follow me then you. Maybe you could take a lesson from my book.