Debit Card Overdraft Fees: Some Banks Still Lack Proper Disclosures

Federal rules established five years ago require that checking account consumers “opt in” to overdraft coverage for debit card transactions at an ATM or point of sale.
What many customers still don’t understand is that “overdraft protection” triggers hefty overdraft fees, about $35 a hit. And by doing nothing, which amounts to accepting the overdraft default option, customers are not charged overdraft fees.

Under the rules, if a consumer does not “opt in,” any transaction that would overdraw the account is automatically declined at no cost to the accountholder.
In 2014, a survey by The Pew Charitable Trusts research found that 52 percent of consumers who had overdrawn their checking accounts in the past year as the result of a debit card transaction did not recall opting in to the service.
A new 2015 report by Pew finds that the biggest banks reviewed are improving their disclosures to let costumers know about the default option (or NOT opting in) which avoids fees. The newest report found that 84 percent of 32 banks tracked over the past three years “clearly identify the overdraft default option or do not charge a debit overdraft fee.” That percentage has surged from 47 percent in 2013.
However, 29 percent of 45 banks studied this year did not clearly identify the “overdraft default option,” which prevents customers from getting dinged with overdraft fees.
Pew’s report states: “At most banks, when consumers overdraw their accounts with a debit card, the financial institution will charge an overdraft penalty fee, the most expensive form of overdraft service: The median fee among the banks studied is $35. Clear disclosure of the existence and size of penalty fees is important to helping customers make informed choices and understand their overdraft options.”

Pew overdraft chart

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