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Overdraft Fees: Opting In

This article was written by in Banking. 32 comments.


As we’ve addressed on Consumerism Commentary before, the Federal Reserve will be requiring banking customers to opt-in to overdraft protection. The highly publicized date of the change is July 1, but this is only the date by which new customers must be free from certain overdraft fees without opting into the service.

Most of us have existing accounts, and the date we need to be concerned about it August 15. This is the deadline for banks to refrain from charging an account holder overdraft fees without explicit consent.

Banks want their customers to opt in, so they will make it as easy as possible to do so. For example, I received a pamphlet from TD Bank, where I have a checking account with a debit card, explaining how I should proceed to let the bank know that I want to be able to use my debit card to pay for something without having the funds to cover the purchase.

TD is offering a program called “TD Debit Card Advance” which covers customers who use a debit card to overdraw their account by more than $5. The bank fronts the money, which must be paid back, and charges a $35 fee. This is the same fee that is currently charged for an overdraft.

Furthermore, the pamphlet states that an overdraft fee can be avoided by making a cash deposit or account transfer by the cutoff time of the current business day pertaining to the local branch.

This change doesn’t affect customers who link a savings account to a checking account for overdraft coverage unless that savings account does not have enough funds.

I have no plans to enroll in the program. There’s no need to introduce more fees into my life, even if they are only potential fees. If I were to use my debit card, I’d prefer the purchase to be declined. That may not have been the case over ten years ago when I had no money in any bank account and still needed to pay for food and transportation.

Do you plan to choose to maintain your overdraft protection by opting in?

Published or updated June 21, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 10 comments… read them below or add one }

avatar Yana

One of my banks informed me of this by e-mail, and let me know that I did not need to do anything if I didn’t want overdraft protection. Another of my banks, when I went to do online banking, put it a different way in hopes that I would opt in in order to make my choice. I think it is crazy that debit cards could be used to take more money out of an account than was in it, and I don’t want overdraft protection at all. I don’t spend what I don’t have, but if I were to make an accounting error, I wouldn’t want something paid with borrowed funds. I accept that ING gives overdraft protection, but I’ve never used it.

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avatar smartbrains

If you ever spend more than you have, it’s probably worth running some numbers. The most important thing is to figure out how to manage your spending and income. Then see if overdrafts are making it harder to get control of your finances.In most cases, an overdraft line of credit is less expensive because you only pay interest on what you borrow. If you’re only short a few bucks, the interest costs will be minimal. When an overdraft of a few dollars leads to a $30 fee, the cost is dramatically higher.

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avatar Weevil

I don’t understand why anyone would want to pay $35 to cover $50 in groceries or $40 in gas. What is that like 75 or 80% interest? At the point, you are better off with a payday loan. It is pretty hard to find something that is actually worse than a payday loan.

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avatar Harm

No Way! I have several checking accounts with the overdraft protection,
(which I never use), and I’ll get rid of them all when I can. It bugs me that
the ‘available balance’ they show me always includes the overdraft protection,
I have to make a calculation or search the statement to find out just HOW
MUCH I HAVE IN THE ACCOUNT, which is all I ever need to know.

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avatar saviior

I cannot believe that I saw in some banks’ Schedule of Fees for Personal Accounts (2009 schedule) where they have: $1.00 fee for each declined transaction from using your ATM/debit card. Is this allowed?!? Also, when banks offer the overdraft protection, or if we opt-in, technically, they have the sole decision to cover it or not; and, either way, they will still charge you $35 fee for each item that causes (or would cause) balance to go below 0.00 [Non-Sufficient Funds/Returned item fee].

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avatar Lace

I work for a credit union and when we received training on these upcoming changes we were a bit surprised when we learned where debit card holds may cause some issues for people who choose not to opt in to their institution’s courtesy pay program. Here’s an example: If you go to a gas station that places temporary $75 or $100 holds on your account (even if it’s for a few seconds) with $20 in your checking account and only intend on pumping $10 of gas – the transaction will be declined because your account does not have enough funds to cover that $100 pre-authorization. Unfortunate consequences for our member base. Just another angle that most consumers will not realize until it happens.

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avatar Kurt

Well then all you have to do is walk into the service station and tell the clerk to give you $10 worth of gas… they’ll just debit $10.

Sorry Lance, you sound like your trying to be helpful, but your employer is feeding you a BS rare case scenario in order to try to help sell overpriced “protection” to your customers.

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avatar Yana

Interesting, Lace. I haven’t heard a thing about this from my credit union. That doesn’t sound nearly as bad as opting in to the courtesy pay program, which is not at all a courtesy in my estimation.

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avatar Nicole

You know it’s funny. Over the years TD Bank has gouged me again and again by rearranging my debit transactions and causing me to overdraft on 2 or more purchases at once. Accounting is basic math and balancing a checking or savings account should not entail more than that. With TDBank, I was never sure what was going to happen with my account even though I spent within what my balance reflected, especially on the weekends. Then come Tuesday I would be surprised with 2-3 overdrafts. Sometimes all they had to do was pay one transaction out of order and that would trigger everything else.

They treated me as if I were a P.O.S. yelling at me when I would call wanting to know why I had overdrawn during times when I really needed my money. They REFUSED to give me any money back. Talking down to me and treating me as if I were a degenerate customer. I have a deposit account AND a loan account with TDBank. Ever since they started this practice which from what I can recall was some time in 2006, I have had trouble with my money. There have been times when they have overdrafted me which has made it impossible for me to pay my car payment on time and actually get my account balance back into the black and stay there for just once. The loan department had the nerve to tell me that they aren’t even making money on my car loan anymore (i’ve made over 40 payments on the loan, you mean to sit there and tell me you didn’t make any interest on those payments) where I countered by saying that if TDBank had not stolen nearly $8000 from me over the last four years I would have never had a problem with my paying my car loan on time. So don’t sit here and tell me that you haven’t made your money back from me.

It wasn’t until this month August 2010 that I have actually seen a change in my account because I have since they have made it available in our online banking accounts to OPT OUT of their TD Advance. Suddenly low and behold I’m not getting raped with fees. Ohhh wow, Gee! Here all along I thought TDBank was telling me it was my fault I was getting charged. Wow, imagine my surprise to see that my transactions HAVE NOT BEEN rearranged this month and nothing has overdrawn.

I am truly livid over this. I really want to know if there is a class-action lawsuit against them because I am due so much money back it’s not even funny. They have been a huge part of my financial demise over the last few years. I am self-employed and my income does not flow into my account on the same days of the week and it has just really put a chink in my whole life. Furthermore, I am not the type of person who blames others for my problems whether they be financial or what have you. They have been stealing from me with their dubious business practices and have been allowed to get away with it for years.

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avatar Nicole

You know it’s funny. Over the years TD Bank has gouged me again and again by rearranging my debit transactions and causing me to overdraft on 2 or more purchases at once. Accounting is basic math and balancing a checking or savings account should not entail more than that. With TDBank, I was never sure what was going to happen with my account even though I spent within what my balance reflected, especially on the weekends. Then come Tuesday I would be surprised with 2-3 overdrafts. Sometimes all they had to do was pay one transaction out of order and that would trigger everything else.

They treated me as if I were a P.O.S. yelling at me when I would call wanting to know why I had overdrawn during times when I really needed my money. They REFUSED to give me any money back. Talking down to me and treating me as if I were a degenerate customer. I have a deposit account AND a loan account with TDBank. Ever since they started this practice which from what I can recall was some time in 2006, I have had trouble with my money. There have been times when they have overdrafted me which has made it impossible for me to pay my car payment on time and actually get my account balance back into the black and stay there for just once. The loan department had the nerve to tell me that they aren’t even making money on my car loan anymore (i’ve made over 40 payments on the loan, you mean to sit there and tell me you didn’t make any interest on those payments) where I countered by saying that if TDBank had not stolen nearly $8000 from me over the last four years I would have never had a problem with my paying my car loan on time. So don’t sit here and tell me that you haven’t made your money back from me.

It wasn’t until this month August 2010 that I have actually seen a change in my account because I have since they have made it available in our online banking accounts to OPT OUT of their TD Advance. Suddenly low and behold I’m not getting raped with fees. Ohhh wow, Gee! Here all along I thought TDBank was telling me it was my fault I was getting charged. Wow, imagine my surprise to see that my transactions HAVE NOT BEEN rearranged this month and nothing has overdrawn.

I am truly livid over this. I really want to know if there is a class-action lawsuit against them because I am due so much money back it’s not even funny. They have been a huge part of my financial demise over the last few years. I am self-employed and my income does not flow into my account on the same days of the week and it has just really put a chink in my whole life. Furthermore, I am not the type of person who blames others for my problems whether they be financial or what have you. They have been stealing from me with their dubious business practices and have been allowed to get away with it for years.

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