subject: Overdraft Protection - Why Opting Out Can Start Saving You Money [print this page] For years banks have been raking in billions of dollars from consumers who may spend more than what they have in their bank accounts in the form of overdraft fees. In 2009 alone banks generated an estimated $38 billion from these fees! Should banks be entitled to charge a fee if you overdraw your account? Sure, but when you purchase a $5 latte from your favorite local coffee shop, and you only have $4.85 in your account, is a $35 overdraft fee excessive? You bet it is! Well now you have options! Is overdraft protection your best bet? Let's find out:
As of July 1st (for new bank customers) and August 15th (for existing bank customers) you will now be required to opt in for overdraft protection. You will want to check with your bank for the specifics, but in general this is how it works.
Banks will no longer charge overdraft fees on debit card purchases, if you don't have the funds to cover the purchase then the transaction would just flat out be declined. This may be a little embarrassing, but it will save you $35 bucks or whatever amount your bank is charging.
If you are worried about the embarrassment, then you may want to sign up for overdraft protection which will essentially keep things the way they have always been. When you don't have enough to cover your purchase, your bank will cover it for you, and assess an overdraft fee. Each bank is different so make sure to check with your bank for the specifics of their program.
Keep in mind that banks can still charge whatever amount they choose for the overdraft fee, and can still impose continuous overdraft fees, if the account is overdrawn for a certain amount of days. Many people are just doing away with overdraft protection altogether. It can make sense to be covered for larger transactions like mortgage or rent payments, but it won't make sense to pay $35 if you don't have enough to cover buying a $1 pack of gum!
The best way to avoid overdraft fees is...well to not overdraft your account. Probably easier said than done, but here are a few tips to get you moving in the right direction:
Monitor your account
If you have online banking, check your account balances regularly. If not call customer service to inquire about your balances. When in doubt don't whip it out!
Look at other overdraft options
Most banks have the option to link your checking account to a savings account or credit card. You will still probably pay a fee, but much less than your standard fee typically ranging from $5 to $10 dollars!
Have backup cards
Have a couple of cards just in case our primary card is a little short. If you don't have other unsecured credit cards consider using a prepaid credit card instead. They are accepted everywhere regular credit cards are accepted, but you don't pay interest on purchases, and guess what? No overdraft fees!
Basically what it comes down to is being proactive with your finances, and knowing exactly where you are when it comes to your account balances.
Overdraft Protection - Why Opting Out Can Start Saving You Money
By: Rigo Gonzalez
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