July 1 and August 15 are the dates consumers need to worry about. New Fed rules for bank accounts go into effect on July 1 for anyone who opens a new bank account, while current account holders should know about changes to their accounts starting August 15.

On these dates, the Federal Reserve is limiting the ability for banks to collect fees from their customers through overdraft fees, a popular income source for banks and an unpopular nuisance for account holders. In the old system, the cost of offering free products was subsidized by the small percentage of customers paying overdraft fees.

Will I do believe it is good that overdraft fees, a penalty that targets whether by design or by practice the least wealthy customers, are placed behind an opt-in barrier, it leaves the banks with two strategies, both which will likely adversely effect customers who otherwise are good citizens and can skate by without paying fees.

First, the banks will enhance their marketing approach in order to convince customers that they want overdraft protection. For new account holders this is easy. A financial associate (salesperson) at a bank can ask the new account holder in person, selling the benefits of overdraft protection while downplaying the fee. For those who apply for an account online, the bank can bury the fee in an unrelated location on the website, separating the fee from the action in the applicant’s mind.

For current customers, banks can give their overdraft protection a fancy name like TD Debit Card Advance and send marketing materials through mail, email, phone, and text message, encouraging the account holders to allow the $35 fee.

Second, services for which we have grown used to accessing for free will no longer be so. I’ve managed to pay almost no banking fees for the last decade. Almost every fee I did pay in a savings or checking account was reversed. That has become more difficult in the past few years. Some of the accounts I prefer, particularly those with brick and mortar institutions like Wachovia, require minimum balances across all my accounts held there.

I expect that towards the end of the summer, banks will begin discontinuing many of their free products. Free checking will certainly be among the first of the most popular services to gradually disappear. The most popular programs across many banks, free checking for students and free checking for seniors, may be the last to go as we see free services for average, middle-class customers decrease.

Senator Chuck Schumer has already urged the Federal Reserve to ensure banks don’t penalize customers as they seek additional revenue when the cash cow of overdraft fees disappears. It’s unlikely the Fed will stop banks from adding new fees, some we may not have considered in the past. The banking industry will take a page from the airline industry’s handbook, in which every additional service has a cost to the consumer above and beyond the fare.

Like we are charged for meals on flights, banks may charge us for a monthly paper statement. Like we are charged for baggage, banks may charge us for viewing images of cleared checks. Like we are charged for changing our flight itinerary, banks may charge us for visiting a teller in person. Airlines charge us for cashing in our miles for “free” rewards, and banks may charge us for automatic bill payment services.

Perhaps banks are justified in charging account fees rather than offering free accounts. Shouldn’t a customer pay for his own service rather than expect another customer (such as one who pays overdraft fees) to subsidize the cost of operating that account?

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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?

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