Reflections

Will Your Bank Try To Force You Into Taking Overdraft Protection?

Posted by on Aug 13, 2010 | 7 Comments

Don’t Be fooled – Your Bank May Try To Force You Into Taking Overdraft Protection

Starting July 1, 2010 for new accounts and August 15, 2010 for existing account, your local bank will need your permission to participate in over draft protection.

Let me share with you a story that happened to my daughter last year. She has always struggled with keeping her checking account balanced, which she admits, and uses her debit card for small purchases. So when she received her checking statement showing 22 purchases on her over drawn account, she was shocked to see that each purchase has a $37.50 over draft fee attached. So it was boo-hoo city for her, even though she admits she was over drawn.

So now banks will have to ask you if you want over draft protection before they can apply their fees. One bank manager actually quit his job since his bank required that he try to mislead his customers into taking over draft protections. He wrote the following story:

I’m happy to say I have given my resignation and will be moving on to a new position where I will be helping people, not deceiving them. However, I do want to make all the readers aware that there is a facility in place to complain to your state government about similar practices. Before I left, I filed a complaint with my state attorney general about the practice. Rather quickly I received a letter explaining that the Attorney General’s office didn’t have time to respond to my individual complaint, but they are always on the lookout for a pattern of complaints about similar bad business practices. I confirmed this with a representative on the phone as well. The thing is, it’s surprisingly easy to file a complaint with your state’s attorney general’s office

I firmly believe that the consumer protection laws were passed to do just that: protect the consumer. To those who cry “let the buyer beware,” we must understand that not all buyers are simply aware in the first place.

So you have been warned. Don’t become a victim of over zealous bank employees who try to convince you that over draft protection was a benefit. The only one who benefits is the bank.

Comments as always are welcome.

Source – Consumerist

  • JFK

    This is part of the banking reform policy the Obama Administration is making to prevent a meltdown and banks charging absorbent rates.

    There is a benefit and safety measure in place for the public benefit.

    • http://wp3.lockergnome.com/nexus/blade/ Ron Schenone

      JFK,
      My family and I watched Flywheel this evening.
      Thanks for the recommendation. It was excellent.

  • Tedd

    Agreed. My bank made the overdraft “protection” seem like a good idea. Their argument is that you are protected from being denied a purchase should you not have the money in the account. Only deeper within the agreement does it mention that $31 is charged each time this happens. I actually did opt in for it and almost immediately I saw the negative impact, to the tune of $190.

    I went to the bank and while they did credit one of the overdraft fees, they would not credit any others since I did opt in. I opted out of the service after only having it for 2 weeks.

    I WANT my card to be declined if the money is not in the account. The only people the overdraft protection protects is the bank. You get charged $31 if you are a penny short of your purchase amount!

  • Jim777

    This is a WONDERFUL idea and I for one am very glad that the Federal Government stepped in and put a stop to banks charging overdraft fees.

    There is absolutely NO REASON for banks to allow a debit card transaction if there is not enough money in the account to cover it. they SHOULD DECLINE the charge rather an process it and charge the customer $35.00 per transaction.

    Overdraft fees ARE A SCAM. A Money Making SCAM the banks have been running for many years.

    I can Guarantee a REPUBLICAN President would have NEVER passed this type of law on banks. The Republicans will continue to say that everyone should just watch their account balance like a hawk and buyer beware but come on. Why not just DECLINE the charge? It’s so much easier.

    Whatever you do. DON’T let the bank talk you into the Overdraft Scam again.

    Thank You to the Government for doing something Fair and Right for Americans.

  • http://ronknights.com/ ronknights

    I don’t understand the whole overdraft protection feature.

    It doesn’t sound like you’re actually being protected from an overdraft, since you end up getting one!

    I swear my bank had a different way of calculating my balance than I did.

    No matter how hard I tried, they always seemed to disagree with me.

    I dumped my standard checking account and got a Prepaid Mastercard.

    Now I can’t get overdrawn.

    If there isn’t enough money in my account, the purchase won’t happen.

    I’ve been very happy with that decision.

  • Kevan

    I’ve changed banks a couple of times because of unjust penalties. The next bank does the same thing, of course, but they haven’t yet done it *to me.*

    On the other hand, remember that banks provide “free checking” only because they expect to make money on fees sometime down the line. That’s why savings accounts aren’t free unless you keep a large balance so that they can make money off the float.

    I think that the fees need to be seriously reformed, but fees are absolutely necessary. Free competition would solve the problem.

  • D

    Having moved to another state nine months ago…I looked at all of the credit unions in the area for one which would allow me to opt out…even before the law went into effect. Found one and have never had a problem with them.

    Something you need to remember about “overdraft protection” is that if you have a hold put on your account…such as buying gas…you’re account can be put into overdraft. This happened to me on vacation last year. I had around $100 in my checking account and needed fuel/food for the trip home. Having gone inside to pay…not at the pump…got about $25 in gas…but my former credit union put an $80 hold for a day on the account which made me overdrawn. Stopping to eat…thought I had around $75 in my checking account…but this hold got me overdrawn again. Even with more than enough money in the account…I still got hit twice.

    Checking my account once I got home…I went in to ask what happened. Having had problems with their service in the past of charging checking account fees while doing direct deposit (policy of no fees with direct deposit-if I hadn’t called them on it would have still been charged…never got a refund for their “accounting” error)…I closed out my accounts and got a Wal-Mart pre-paid card. Used that until I got to where I live now.

    If this is happening to you…look at the health of the institution. I found this former credit union had taken a hit to the tune of 40%+ on bad loans…while my current credit union was shy of 4%. My former credit union was using their “members” to make up for bad decisions of their board/loan officers.