Apparently a lot of folks run their checking account balances close to the line.
An online July poll by the National Foundation for Credit Counseling found that 26 percent of Americans plan to opt-in for debit card overdraft protection, in spite of the hefty fees involved — up to $35 each time the balance dips below zero.
New federal rules on debit card overdraft fees require banks to get your permission for overdraft protection. The requirement for new accounts went into effect July 1, and the rule for existing accounts goes into effect Aug. 15.
The rules came about after a storm of controversy erupted over the fees. Unbeknownst to many folks, banks automatically covered overdrafts on debit card withdrawals and purchases, then charged a fee each time. In some cases, customers racked up more than a $100 in fees in one day, not realizing their checking account balances were at zero each time their debit cards produced cash at the ATM or were accepted at the cash register.
Link Checking Account with Savings Account
Consumer advocates urge you to forego the overdraft protection programs and choose less-expensive alternatives, such as linking a checking account to a savings account to cover overdrafts.
“It is disturbing that this many people live so close to the financial edge,” National Foundation for Credit Counseling spokeswoman Gail Cunningham said in a press statement. “The real answer lies in examining the root problem and resolving it.”
Some polls estimate an even higher percentage of consumers living on the edge. According to a May survey by Credit.com, 48 percent of consumers planned to “opt-in” for overdraft protection.
Banks, meanwhile, project a big hit to their revenue as a result of the new law. Wells Fargo projects its fee revenue will drop by $500 million in the second half of the year.
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