Citibank Closes Overdraft Protection Due To Lack Of Overdrafts

We all know that banks offer overdraft protection because it makes them money, not because they want to be kind to customers. Still, it seems weird–or maybe just brutally honest–that Citibank would cancel Corrie’s overdraft protection service simply because she’d managed to avoid any overdrafts since she opened her accounts.

I have a Citibank checking account linked to several other accounts (mortgage, credit cards)… due to balances on all of these, I was eligible for the whole package that included a Line of Credit. I did not really want the line of Credit but agreed to it because it provided overdraft protection.

Over the weekend I got a notice that my line of credit had been closed effective 11/21/09, due to non-usage. When I called for an explanation, I was given the same line – that it was closed due to lack of use. I explained that the whole point of overdraft protection is that it is there on the rare occasion it is needed, but to no avail. I now no longer have the line of credit. It’s just ironic, since they were the ones who insisted on opening it for me. As careful as I am about overdrafts, I am now much less likely to use my Citi debit card, since I no longer have the reassurance of OD protection.

I guess “We can’t afford all the credit we’ve extended to our customers” doesn’t roll off the tongue as easily?

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  1. Loias supports harsher punishments against corporations says:

    Supposedly we’ve hit the bottom of the U.S. – and possibly world – economic crisis.

    So, when will we hit botton on the crazy, awful things that banks will do to screw us?

    Too big to fail? Or too big to care?

  2. SteveZim1017 says:

    Keeping lines of credit available to a large population that they never see a profit from is a risk I wouldn’t expect a bank to keep right now. These are the kinds of correct fiscal decisions we want to see banks making.

  3. shalegac says:

    Lesson learned as a consumer. Work in the “red” or be penalized.

    Thanks Citibank.

    • nbs2 says:

      Isn’t the lesson to the consumer that even free things cost money? The bank had some opportunity cost in extending the line of credit. The expense was not worth the investment, so they cut their losses and “went home.” Essentially it was insurance through a guaranteed loan. Either the bank makes money on interest or premiums. If it isn’t making money on either, why offer it?

      Now, I suppose there is an element of attracting good customers, which the OP appears to be. But, good feelings are more affordable in an up economy.

  4. hamburglar says:

    Same thing happened to the Chase credit card I had as overdraft protection for my checking account. After 3+ years of never bouncing a check (and never using the card otherwise), they took their ball and went home.

  5. Hi says:

    I’m sorry Mrs Smith we have to cancel your Brinks Home Security because noone has broken into your home recently.

    • tundey says:

      There’s a difference. You are paying Brinks for their services while the bank is extending credit for free. I bet they wouldn’t have closed the account if the customer was paying for it.

  6. 2 replies says:

    Proof they only had it to fleece their customers, not to provide a service to them.

    • AK47 - Now with longer screen name! says:

      I don’t think the banks make a distinction between fleecing and service anymore . . .

  7. tundey says:

    What’s wrong with them closing a line of credit if the customer isn’t using it? That’s money they could free up for other customers (at least in theory).

  8. MaytagRepairman says:

    I’m guessing that in a couple of months she will get a bulk mail flyer advertising the service they just cancelled.

  9. XTC46 says:

    Credit card companies slash credit lines that go unused also, and close stale accounts, as do frequent fly programs, rewards programs, etc. They are all liabilities.

    • stevejust says:

      I think everyone understands unused credit lines are POTENTIAL liabilities. But in the context of this story, the unused line of credit is apparently held by a fiscally responsible individual — the precise kind of person a bank should DESIRE to extend credit to, since if it were ever exercised it by all appearances would be paid back.

      Granted, maybe there’s something about the person’s credit score or something else we don’t know about. But it seems that this is a bank recalling a line of credit without regard to whether the risk of that line of credit is good or bad. And that is kind of disconcerting when Citi has a scheme to cover up to $750,000 of each depositor’s money under FDIC protection, by automatically putting amounts over $250k into other, different, “Citibanks” i.e., Citibank N.D., Citibank S.D. etc.,. and the FDIC itself is bankrupt.

  10. henrygates3 says:

    Why not just call back and ask for overdraft protection? It seems a banking CSR would be thrilled to sign her up.

  11. econobiker says:

    Maybe Citigroup considered her an “unprofitable deadbeat”. Maybe some Citi V.P. actually watched the latest PBS Frontline about the future of credit cards which explained how “overdraft protection” was, in fact, a credit product and Citi might be liable for it under credit laws versus “courtesy fees”.

    (If you get to watch that episode it drips with various slimey industry reps touting their spin when confronted…

  12. morlo says:

    “I am now much less likely to use my Citi debit card, since I no longer have the reassurance of OD protection.”

    What terrible fate does Corrie thinks awaits without “protection”? Chances are the overdraft+ridiculous fee will happen anyway.

  13. TechnoDestructo says:

    If you’d like to hear a Citibank executive spout every bullshit industry talking point re: overdraft fees, watch this Senate hearing:

    http://cspan.org/Watch/Media/2009/11/17/HP/A/26146/Senate+Banking+Cmte+Hearing+on+Abusive+Overdraft+Fees.aspx

  14. puck says:

    Bank of America has the exact same policy. I also opened a line of credit for the purpose of overdraft protection and they also closed the account for “lack of use” after it sat “empty” for too long. Seems like typical bank play book to me.

    The up side is that she can probably either open up a new line of credit and tie that to her account (and possibly repeat the process as needed), or open up a savings account and tie that to her checking for ODP instead.

    • West Coast Secessionist says:

      No, don’t use a savings account for ODP! The “Protection” you get from that at most banks (especially sleazy ones like Citibank and Wells Fargo) still typically costs you money.

      That’s right, a fee for the bank moving ones and zeroes in their computer, representing YOUR money, from one of your own accounts to another.

      Best to just keep that extra cushion money in your checking account and avoid overdrafts entirely… no problem if your checking account offers a great interest rate :) (schwab investor checking)

  15. Sarcastichobbes says:

    I can not say this enough. This is why I only bank with Credit Unions. (research them in your area)

    Credit Unions are far superior to banks in quality of service and they listen to your concerns far more.

  16. lincolnparadox says:

    This might be a good time to look into any local banks or credit unions and switch over to them, if you haven’t already. The main problem is, so many people are so deeply in credit card debt that they have no alterbative other than to bend over and take it.

  17. The hand that feeds, now with more bacon says:

    Credit unions are a good choice. My credit union’s overdraft transfer fee is $0.50. Upon overdraft, they transfer the missing balance + $50 (can’t change the $50, I’d rather it be like $500).

    I’ve only been charged the fee a couple times. Considering it only costs $0.50, I don’t pay attention to my checking balance — I keep all my money in my 2.0% savings account. If they charged $35-$50 like other banks, I’d be checking my balance all the time.

  18. Urgleglurk says:

    Scar was right, especially about Citibank.
    “I’m surrounded by idiots.”

  19. notforsale says:

    I’ll tell you the truth because I work for Citibank. The overdraft protection line is not included in any package, and having other accounts does not “qualify” you for it. They were just selling you stuff that you don’t need because Citibank forces sales people to lie to customers in order to make quotas that get you fired if not met. They call it the cross-sell, and they have a ratio for it. The more products per “session” the higher that ratio. Minimun required? 3 products per session or you are not doing your job and your reputation and job go out the door theinstant you give a customer a choice. They are always looking. There, I said it.

  20. PeteWas says:

    Why is the Federal Reserve Deregulating Banks by Removing the Consumer Protections in the Truth in Lending Act from Application to Bank Overdraft Plans at the Same Time that Congress is Proposing Strengthening Consumer Protections in Bank Overdraft Plans?

    On Thursday November 12, 2009 the Board of Governors of the Federal Reserve adopted a new regulation and issued a new Official Staff Commentary relating to bank overdraft fees. The regulation is about 93 pages in length and has the appearance of a consumer friendly regulation that has a provision that as of July 1, 2010 consumers must affirmatively opt-in to overdraft protection plans. However, I believe that even this attempted consumer friendly provision does not go far enough in that it does not apply until July 1, 2010.

    Given the recent history of the banks in raising credit card interest rates before the effective date of the new federal law providing enhanced consumer protections for credit card consumers, one can only be suspect that banks will use this time before the July 1, 2010 effective date to continue to harm the interests of consumers. The regulation does not provide substantive protections to consumers, but rather to the contrary contains a provision buried in the fine print that deregulates bank overdraft protection plans by removing the Truth in Lending Act (TILA) from application to overdraft plans.

    This untimely deregulation of banks with respect to overdraft plans is arguably the most damaging provision of the regulation and eviscerates any vestiges of consumer protections for those who have already been affected and for those who will be affected in the future by bank overdraft plans. Not only are there no safeguards for consumers, the interpretation by the Federal Reserve that makes TILA inapplicable enables banks to continue to perpetuate unfair practices with impunity.

    Attorney Peter N. Wasylyk, 1307 Chalkstone Avenue, Providence, RI 02908
    Tel: 401-831-7730
    Fax: 401-861-6064
    E-Mail: pnwlaw@aol.com