Dreaded Debit Card Overdraft Fees are History – Unless You ‘Opt-In’

Woman at ATMStarting today, new regulation drawn up by the Federal Reserve prohibits overdraft fees on consumers using debit or ATM cards – unless the card user has opted to join a bank’s overdraft protection plan.
For those who do not “opt-in,” debit card purchases will be denied if you are overdrawn – but no overdraft fees will be imposed.
The new policy effectively ends the much-maligned bank practice of charging overdraft fees of $30 or more per transaction, a system that allowed the piling on of fees for a consumer that may have been overdrawn by only a few dollars.
Beginning today, Aug. 15, the new rules require your bank to get your permission to apply its standard overdraft practices to everyday debit card and ATM transactions before you can be charged overdraft fees.
To grant this permission, you need to respond to your bank’s notice and “opt in,” or agree, to your bank’s terms and conditions. The new rules apply to existing and new bank and credit union customers.
Most banks will offer a line of credit or a link to your savings account to cover transactions when you overdraw your account. But you must be approved for such a line of credit and your credit report may be reviewed. So if your credit is poor, you may not be approved.
Even for ‘opt-in” plans, banks typically charge a fee each time you overdraw your account, but these “protection plans” may be less expensive than their standard overdraft fees.
The new regulation does not cover checks or automatic bill payments that you may have set up for paying bills, such as your mortgage or utilities.
“Your bank may still automatically enroll you in their standard overdraft practices for these types of transactions,” the Federal Reserve states on its webpage covering the new overdraft rules. “If you do not want your bank’s standard overdraft practices in these instances, talk to your bank; you may or may not have the option to cancel.”
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