Beginning in July of 2010 new rules regarding overdrafts will be put into place by the Federal Reserve. The changes relate specifically to how financial institutions cover overdrafts caused by ATM and debit card transactions and not personal checks.
Your bank should send you an explanation of how it handles overdrafts and give you an option to accept or decline its practices.
Overdraft Basics
An overdraft of your checking account can happen when you write a personal check, withdraw money from an ATM, or make a purchase or payment with a debit card when there isn't enough money in your account to cover the charge.
Most banks will cover the amount that was overdrawn for a fee between $20 and $30. Each time you complete a transaction with insufficient funds you'll be charged another fee. This is what's known as "standard protection."
For example, if you wrote two personal checks for $100, but you only had $75 in your account, you would then be charged two NSF (non-sufficient funds) fees when the checks were processed. If the fee was $25, you would have an account balance of negative $175.
Some financial institutions also overdraft protection plans. This is essentially a line of credit or a link to your saving account to cover overdrafts. Banks may also charge a fee for this service, but overdraft protection plans are typically less costly than standard overdraft protection practices.
What is Changing?
Instead of automatically participating in your banks standard practices for overdrafts, you'll now be given an option to enroll. That means your financial institution can't automatically charge you overdraft fees before getting your permission.
It is important to note that the new rules concerning overdraft protection do not apply to personal checks or any automatic bill payments you have set up. Your bank may still enroll in you in its standard practices for these types of payments.
The changes are intended specifically for day-to-day charges put on your debit card or ATM card. If you decide not to accept your bank's overdraft practices charges to your card will simply be declined when there is an insufficient amount of money in your account.
For checking accounts that already exist, if you do not opt in before August 15, 2010, standard practices will not apply to overdrafts with ATM and debit cards. You should receive a notice about your banks practice regarding any existing accounts.
When you open a new account on or after July 1 2010, your bank will not be able to charge you NSF fees unless you opt in. Any accounts opened before July 1 will be treated as existing accounts.
You can decide to opt in or opt out of your banks overdraft practices whenever you want. It's ok to change your mind about accepting or declining standard practices.
Learn how to keep better track of your personal finances and avoid an overdraft all together using a check register. You'll get one free when you order personal checks from Check Advantage, and can order extras for just $1.49 each. Read more about using a check register in our article How to Keep Track of Your Personal Finances.
100% Satisfaction If you are not completely satisfied with your purchase, please contact us immediately. We promise to take care of it.
100% Secure Check Advantage partners with McAfee & VeriSign to ensure all personal data remains safe. Click seals to verify and learn more.
100% On Time, Every Time Check Advantage partners with UPS to ensure checks arrive on time - every time. We offer online shipment tracking.
100% Privacy Check Advantage partners with the Better Business Bureau to ensure complete privacy and the reliability of our company.
