Banks Must Now Ask You To Opt In To Debit Card Overdraft Plans

If you’re opening a new bank account today, don’t be surprised if you’re asked to enroll in an overdraft plan for debit-card purchases. And don’t be afraid to say no, either. Today’s the first day that banks have to ask your permission to enroll you in such plans; yesterday, they could have just signed you up automatically. If they did, though, you can still back out. Existing bank customers must opt in no later than August 15th if they want to keep their overdraft “protection.”

The new rule doesn’t apply to checking accounts or to recurring charges billed to a debit card.

Consumer Reports recommends not signing up for the plans, and suggests some other options if you need to tap some reserves when making a purchase:

  • Link your checking account to a savings account. If you overdraw your checking account, money in your savings account is used to cover the transaction. Banks typically charge a fee to transfer the money, but it’s usually just $5 to $10—much lower than the fee charged by overdraft programs.
  • Set up low-balance alerts. Many financial institutions will send you an e-mail or text when your balance reaches the danger zone.
  • Sign up for online banking. Regularly monitoring your checking account online will help you avoid spending money you don’t have.
  • Get an overdraft line of credit with your bank or credit union. You’ll need to apply, and customers with poor credit may not qualify. But if you’re eligible, this could provide a less expensive form of overdraft protection than fee-based coverage.

Banks have been plying existing customers with requests to opt in for weeks, and those offers are likely to keep coming until August 15th. If you’re still not sure why you shouldn’t opt in, check out some of the links below.

I Spent $94 And Was Stuck With Nearly $500 In Overdraft Fees
Consumers Warned Not to Opt In as Banks Market Expensive Debit Card Overdraft Fees [PDF] [Consumer Federation of America]

What’s behind those urgent notices from your bank [Consumer Reports Money]

Comments

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  1. Sure I could agree with you, but then we'd BOTH be wrong. says:

    Don’t buy the bank’s hype – it will be too expensive!

  2. jayphat says:

    Didn’t we JUST do this less than a year ago?

  3. sponica says:

    My credit union never allowed you to overdraft with a debit card. If transaction was more than was available, it would be denied

    • backinpgh says:

      Same, my CU just denied debit transactions if I didn’t have the money. If you overdrew on a check or ACH it would take it out of your savings or hold the check until your paycheck was direct deposited (if you had direct deposit).

    • A.Mercer says:

      My credit union has been trying to get me to opt-in for a few weeks now. When I go to check my account online I had to get by a screen telling me to opt-in for my protection. I was getting quite a bit of mail from them telling me that I needed to either opt-in or opt-out but either way I had to let them know. I wished I had saved that mail. Would have been fun to send a copy over to the Consumerist.

      • Kimaroo - 100% Pure Natural Kitteh says:

        I get that screen as well, but ALSO.. they have been emailing me almost daily, AND robo-calling my cellphone, even though I have my home phone attached to my account as well. They’re really starting to piss me off.

        And this is a credit union. I stopped using my checking there a couple of years ago, but I still have a credit card with them. I’m starting to wish I didn’t.

    • travel_nut says:

      I make my own credit union at home.

  4. NTC-Brendan says:

    Got the call from the Monster-Mega Bank that we have a couple of accounts with (our main bank is a community CU). Got the full court press. Shut them down with the quickness. We disabled Debit Card Overdraft as a condition for opening the accounts in the first place. Not even going to play that game.

  5. Stephmo says:

    This piece of advice may not be compatible with opt-out:
    Link your checking account to a savings account. If you overdraw your checking account, money in your savings account is used to cover the transaction. Banks typically charge a fee to transfer the money, but it’s usually just $5 to $10—much lower than the fee charged by overdraft programs.

    This will actually depend on how your bank processes this type of overdraft and displays your available balance to you with linked overdraft. If your bank process everything in order of processing time, this is likely true – but double-check to make sure their processing knows that your total available balance at the time of any transaction is your checking account + linked overdraft.

    Why? Because the way the regulation works, banks are required to decline the transaction if funds are not immediately available to you. Make sure you ask your bank if linked accounts show as immediately available before opting out and assuming you’ll never be declined for insufficient funds.

    On the other hand, traditional overdraft protection lines – the $250-$3000 lines of credit banks offer – do tend to show up as part of your total available balance and would be available whether you opt in or out.

    You really should ask your bank how your overdraft protection will work with the opt-in/opt-out elections. Most of the news has been really positive, but this little technicality is one of the cracks. Luckily, most of the other ones ($1 pends vs. available funds, food bills w/o tip pends vs. available funds) end up in favor of the consumer.

    • chocolate1234 says:

      Yeah, that’s true at the bank I work for at least. You have to be opted in for overdraft protection to work.

      • David Doe says:

        I had overdraft protection years ago it was linked to a credit card. One say we decided to use it i’m not sure why perhaps we saw a really good deal on something or it was an emergency i don;t remember but i wasn’t worried at the time because I had the “protection”. We had $1000 dollars worth of protection. I think we went over our balance by about $400 or so so the lovely bank transfers $25 dollars to cover the overdraft and charged us a $35 dollar fee naturally that wasnt enough so they repeated it they did this repeatedly until the $1000 dollar “protection” was used up by the fees then bounced the check Then they charged us a $100 fee for going over on our credit card and a nice little $38 dollar fee every day our account was over.

        We eventually straightened things out and it only cost us about 300 dollars in the end. What a wonderful service they offered. This was bank of america. gotta be about 10 years ago though.

    • Jeff-er-ee says:

      Thanks for pointing this out. My CU does link my checking and savings accounts, and transfers without fees (which makes me lazy sometimes), but I hadn’t considered that they may still shut down a transaction even if there are sufficient funds in the other account to cover. I’ll check.

  6. Stephmo says:

    This piece of advice may not be compatible with opt-out:
    Link your checking account to a savings account. If you overdraw your checking account, money in your savings account is used to cover the transaction. Banks typically charge a fee to transfer the money, but it’s usually just $5 to $10—much lower than the fee charged by overdraft programs.

    This will actually depend on how your bank processes this type of overdraft and displays your available balance to you with linked overdraft. If your bank process everything in order of processing time, this is likely true – but double-check to make sure their processing knows that your total available balance at the time of any transaction is your checking account + linked overdraft.

    Why? Because the way the regulation works, banks are required to decline the transaction if funds are not immediately available to you. Make sure you ask your bank if linked accounts show as immediately available before opting out and assuming you’ll never be declined for insufficient funds.

    On the other hand, traditional overdraft protection lines – the $250-$3000 lines of credit banks offer – do tend to show up as part of your total available balance and would be available whether you opt in or out.

    You really should ask your bank how your overdraft protection will work with the opt-in/opt-out elections. Most of the news has been really positive, but this little technicality is one of the cracks. Luckily, most of the other ones ($1 pends vs. available funds, food bills w/o tip pends vs. available funds) end up in favor of the consumer.

  7. Eat The Rich -They are fat and succulent says:

    I contacted my bank and opted out of this so called “service”

  8. The Dord says:

    Chase sent me mail over a week ago about this. I didn’t sign up for it so when I try to go over with my debit card at a B&M store, it won’t let me use the card BUT it will still charge me an overdraft fee if i tried this with any online purchases.

    Wish chase would go all the way like Bank of America.

  9. GuyGuidoEyesSteveDaveâ„¢ says:

    I logged in today and got an “alert” about opting-in. What did I do? Take a screencap, and also make a PDF of the upsell they gave me to opt in and sent it to Consumerist. Didn’t even read it.

    • Fidget says:

      I got snail mail, after having opted out a few weeks prior, saying, “We heard you had an everyday purchase DENIED recently! To make sure this never happens again, we’d be happy to protect you, free of charge!” I was a few cents short at Trader Joe’s, got denied, changed cards and skipped happily home knowing that I didn’t just pay $55 for $20 of groceries.

      • GuyGuidoEyesSteveDaveâ„¢ says:

        I once had a bank employee explain it’s so I don’t go through the shame of being declined. I said, “Miss, I have worked in retail for many years. Most systems are so “user-friendly” that they don’t tell the cashier WHY a card was declined. More so things like gas pumps. If it gets declined, I’ll and/or the cashier will first assume it because there is a problem with the computer at the bank or there is a line down somewhere, etc… I’ll simply switch cards for another one. No embarrassment at all.”

  10. hatluck says:

    As always good luck with opting out with Bank of America, had to sit through a 10 minute lecture from the CSR and then she had to apparently transfer me to her Supervisor to take care of it.

    But I really didn’t expect anything else from BoA.

  11. NebraskaDan says:

    The bank I work for will let you hook your savings account up as backup, but opt-out. Meaning if you spend more then your checking AND savings, it will decline.

    • ChuckECheese says:

      Can I then hook up my checking and savings to my neighbor’s checking account? He lives nearby, and he looks like he has more money than I do.

  12. crazydavythe1st says:

    I wonder if this extends to the overdraft protection often extended on checking accounts as a whole.

    I say this because this could be disastrous for someone that writes a check that goes above their account balance. Debit cards are one thing, but for the places that take checks in the old fashioned way without converting them into ACH transactions a person could end up in serious trouble if their bank doesn’t cover the snafu. It’s the only reason I’ve never opted out of overdraft protection on my checking account. I don’t intend on overdrafting, but if something were to happen a hot check can be a big deal.

    • Stephmo says:

      Call and ask your bank – the regulation calls checks (and other non-single use ATM/Credit Card Transactions) “non-covered” transactions. The way that some banks are setting this up is to have 2 sets of elections available, but to only really talk about the one they have to talk about – the covered transactions.

      By default, you’d likely look like this to a bank if you never did anything per the new regulation: ATM/Credit Cards: Opt-Out Non-Covered Transactions: Opt-In.

      This means declining on the ATM/Credit Card transactions at the ATM/point of sale and avoiding overdraft fees on those transactions BUT all other transactions are now up for being processed by your bank and having overdraft fees charged.

      Call your bank and see if you can verify separate elections. Obviously, for the banks that opted-out everyone on ATM/CreditCard transactions, that election is made, but they may still allow the choice for non-ATM/CreditCard transactions.

      I would personally weigh the real-life issues of bounced checks (think of everything merchants say they do and charged with returned checks) against asking to have all of those transactions automatically returned for insufficient funds by opting out…a lot of those places are far worse than the bank fee.

  13. aaron8301 says:

    “don’t be surprised if you’re asked to enroll in an overdraft plan for debit-card purchases…”

    “…The new rule doesn’t apply to checking accounts…”

    Um, isn’t a debit card directly connected to your checking account? Did I miss something?

  14. LaziestManOnMars says:

    My favorite line from the bank on this one: “this service is free of charge to you, you only pay a fee at the time of the overdraft…”

    gee, thanks.

    • backinpgh says:

      Well I’ll be damned if I’m gonna pay a fee to PAY A FEE for overdraft protection…

  15. sheriadoc says:

    When I sign into my online credit union account, I’m now greeted with an invitation to opt-in to overdraft protection. There are only two options: “Yes” and “Remind Me Later.” At the bottom it says if they don’t hear from me by August 15 they will un-enroll me. I can’t be bothered to call. Only a month and a half to go…

  16. mac-phisto says:

    i’m not suggesting that people opt-in, but it’s important to know the ramifications of opting-out. for instance, a bank CANNOT shape their non-ATM overdraft policies around your decision to opt-in. so, if a banker tells you your checks will bounce if you don’t opt-in, they’re full of it. same with EFT transactions.

    what they CAN do is revoke your debit card if ATM transactions continually force an overdraft (yes, it’s still possible even if you opt-out). this regulation does not equal a free pass to manipulate the system.

    so, if you opt-out & you don’t have other backups, just make sure you keep good track of your balances.

    • Benny Gesserit says:

      And, of course, to the “downer Dad”, keeping track of spending is the first line of defense and it costs nothing.

    • Kimaroo - 100% Pure Natural Kitteh says:

      What do you mean, continually force an overdraft? You mean if you keep trying to use your card and it gets declined? Or do you mean if you’re using your card and it makes it where they have to cover a check you wrote?

      • mac-phisto says:

        i mean if you use your card & it puts you in the red. this can still happen in certain circumstances even if you opt-out. for example, pay-at-the-pump transactions are authorized in such a way that you can pump gas even if you don’t have the funds to pay for it.

  17. Not Given says:

    We wrote a letter to both banks we having checking accounts at telling them do NOT overdraft our account, not for debit, not for any other type of transaction. I’ve got balance alert texts and I check the websites often and keep really close tabs on the balances. If there is an overdraft or a bounce , it will be fraud or a bank mistake.

  18. sonneillon says:

    I haven’t gotten any letters emails or alerts. I get the feeling my bank doesn’t like me. It might also be that I have a business account and I talk to different people who actually treat customers with a modicum of respect.

  19. MsFab says:

    My credit union sent me an email telling me why I needed their valuable overdraft service. I sent it to the trash folder. No way am I signing up for that, I’d rather suffer the “embarassment” of having a purchase declined.

  20. techstar25 says:

    I logged into a bank website yesterday and was presented with two options: “Opt In” or “Remind me Later”.
    Yes, those were my only options. I wonder how often they will choose to remind me? Every time I log in? How much later is “later”? Tomorrow?

  21. AllanG54 says:

    USE A CREDIT CARD !!! Pay it off at the end of the month. Don’t worry about overdrafts. How much more simple can this be.

  22. Tedicles says:

    Got a nice letter from my bank asking me to agree to the overdraft protection. After reviewing some of the fine print, there was a nice little line hidden in there stating (I actually had to re-read a few times to make sure it was true…)

    Under our standard overdraft practices:
    “There is NO LIMIT on the total fees we can charge you for overdrawing your account”

    Do they at least get 1 point for honesty??? ;)

  23. AngryK9 says:

    Tune in next month when Banks suddenly realize that now they can charge a premium fee for the “convenience of overdraft protection”, which was once given to you for nothing, whether you wanted it or not.

  24. lyanna says:

    Probably I am one of the thousands of individuals who opted in to overdraft coverage with my financial institution. First off, I already have overdraft coverage attached to my savings accounts and credit cards, but in the event I fully run out of money, it is good to know I can still buy a roll of toilet paper if I need it, even if does price a lot more than it should. Sure a payday loan would make more sense, but taking the time to fill out the paperwork often isn’t worth the expense of just incurring an overdraft fee. The random overdraft fee each once in a while is not that bad of a charge, it is the ones where a cup of coffee ends up costing you 400% more than it should, or when there are multiple overdrafts in a brief period.