Starting on July 1st, the Federal Reserve has required banks to get consent from customers before enrolling them in overdraft protection programs so they can experience the excitement of cascading overdrafts. The problem is that consumers may be trading overdraft fees for insufficient funds fees and good old-fashioned bounced checks…and end up worse off in the long run.

Bob Sullivan at the Red Tape Chronicles (who will be at our next Consumerist meetup on January 21) looked at financial life under the new rules, and offers advice based on your financial situation.

If you have overdrawn your account in the past year, think before you opt out. A bounced check can have more far-reaching consequences than an overdraft fee. You might end up in the ChexSystems database and lose check-writing privileges, for example. So don’t opt-out until you are ready to stay out of the red.

Consumers who live near a zero balance will find that so-called “account holds” placed on debit purchases by gas stations and some other businesses can cause headaches in a post-overdraft-fee world. Holds, which exceed the transaction price, can freeze funds for days and cause confusing time lags. Be cautious using your debit card for purchases at firms that place holds. One tip: If you must use debit, use a PIN instead of a signature. PIN-debit transactions generally are processed faster than signature-debits, so that will help you keep your account balance up to date.

Of course, the best way to prevent issues with overdrafts is to not let your bank account hover near zero. However, life happens, and sometimes that’s not possible.

New overdraft rules: Worst of both worlds? [MSNBC] (Thanks, Mike!)

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