Your Debit Card on Overdraft Fees Center for Responsible Lending
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Has Your Bank Mentioned Its Overdraft Fee Program Lately?


There is a new battle underway over the future of your wallet. Banks and credit unions are trying everything they can to get your debit card hooked on expensive overdraft fees. When they ask you to opt in to their expensive overdraft programs, just say NO!


In recent years, many banks have offered overdraft coverage as an automatic “feature” on most accounts. Banks routinely cover overdrafts for a flat fee of about $34 per incident, even on the smallest of transactions. Banks and credit unions have followed this overdraft fee recipe to the tune of billions of dollars every year, collecting nearly $24 billion in fees in 2008. The leading cause of overdraft fees is small debit card transactions.


Now as we move forward, banks and credit unions will no longer be able to cover overdrafts on debit card transactions for a fee without YOUR consent. Of course, that won’t stop banks from trying their best to lure you in and get you and your debit card hooked on unfair overdraft fees.


What will you choose to do? Opt-out by doing nothing? Or opt-in to overdraft coverage on your debit card?




Your Nest Egg: Opt Out by Doing Nothing


Your Nest Egg Protected Without Overdraft Fees

It's easy to make sure you don't overdraw your account--and rack up expensive fees in the process--by simply doing nothing. If you have already opted in, simply call your bank and tell them you want out.


Your bank cannot charge you overdraft fees on debit card transactions UNLESS you opt-in. Instead, if you lack funds, your transaction will be declined at no cost.


If you would like overdraft coverage on your account, there are better options available, such as: 1) signing up for a line of credit or 2) linking your checking account to your savings account or credit card.


Just ask your bank or credit union about those less costly options and make the switch today to protect your nest egg.



Opt-In: Your Debit Card With Overdraft Fees


If you opt-in to overdraft coverage on your account, you expose yourself to the set of practices many banks and credit unions engage in to maximize their revenue from unfair overdraft fees. They often charge as much as $35 per overdraft transaction and even reorder your transactions to increase fees. Luckily, there are ways to avoid debit card overdraft fees entirely, such as linking your savings account or credit card to your checking account for back-up funds or applying for an overdraft line of credit.


Did you already opt-in but wish you hadn’t? You are allowed to change your overdraft preferences at any time. Contact your bank and tell them you no longer want overdraft coverage for your debit card.


Overdraft Story


One college student, G.C., used his debit card over the course of four days, spending less than $17 for coffee, supplies, and other small purchases while studying for exams. As shown below, G.C. was charged $245 for overdrawing his account by about $13 over the course of 7 transactions.


Transaction #Transaction AmountAmount of OverdraftOverdraft Fee Charged
1 $4.98 $1.09 $35
2 $1.94 $1.94 $35
3 $3.01 $3.01 $35
4 $1.79 $1.79 $35
5 $1.79 $1.79 $35
6 $1.74 $1.74 $35
7 $1.70 $1.70 $35
TOTAL $16.55 $13.06 $245.00

If instead G.C. had these debit card transactions declined, he would have stopped at the first transaction, saving over $200 in fees.

Any Questions?



Quick Facts

Your bank can’t charge overdraft fees on debit card transactions without YOUR consent.



If you don’t opt-in to debit card overdraft coverage, any transactions which would cause an overdraft will simply be declined for no fee.



You can change your mind about whether your debit card has overdraft coverage at any time.



Cheaper forms of overdraft protection are offered by most banks, like lines of credit or linking your account to savings or a credit card.


Learn more about the dangers of overdraft fees before it is too late:

 


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