by: J.P. Verzosa, Vice President-Branch Manager, Bank of the West
Unfortunately with all the bad press surrounding overdraft fees for ATM/transactions opting in for this service at your bank has taken on a negative connotation.
So what is changing?
Recent regulatory changes will impact how your Bank can charge overdraft fees for ATM and everyday debit card transactions for all personal accounts (business accounts are not affected).
In the past, if you did not have sufficient funds in your account, your Bank could, at its discretion, pay these ATM and everyday debit card transactions and assess an overdraft fee as part of its debit card overdraft protection service.
Effective August 15, 2010, unless your bank gets your permission, you will lose the convenience of of this service for your ATM and everyday debit card transactions and assess applicable overdraft fees.
How does this affect you the consumer?
Well really it doesn’t effect you if you opt in to the service. If you opt out you may avoid losing money in possible fees. But what are you really avoiding here. Let’s take a look at some scenarios.
Scenario 1 – Mary has opted in and attempts a debit card purchase that exceeds her available balance.
Mary Johnson and her family live paycheck to paycheck. Because she and her husband both have debit cards (and because her husband sometimes forgets to tell her about his debit card transactions), she occasionally overdraws her account. In the past, her bank has paid some of her debit card transactions as a courtesy to her and charged an overdraft fee the following day.
Although Mary is never happy with the fee, she is usually grateful that the transactions were approved as one time she was purchasing groceries for her daughter’s birthday dinner and another time she was paying for her mother’s medications.
It is now August 20th, five days since the new regulation went into effect. Mary is paying for her mother’s medication and is unaware that her husband made a large ATM withdrawal this morning. The amount of the pharmacy transaction is $125.50. Mary’s checking account available balance is currently $36.50.
Mary leaves the pharmacy with the medication. Her account available balance will be overdrawn by $89.00.
Scenario 2 – Oscar opted out and attempts a debit card purchase that exceeds his available balance.
Oscar Smith does not balance his checking account and regularly overdraws his account. In the past, his bank has paid some of his checks, ACH transactions, debit card transactions, and ATM withdrawals as a courtesy and charged overdraft fees the following day.
Oscar is very upset at the amount of OD and NSF fees he has been charged. He decided to not sign up , to avoid any additional overdraft fees resulting from ATM and everyday debit card transactions.
It is now August 20th, five days since the regulatory changes went into effect. Oscar has found a new suit for a job interview the following day. The amount of the clothing transaction is $191.80. Oscar’s checking account available balance is currently $175.50.
Because Oscar opted out of Debit Card Overdraft Protection, here is how the transaction authorization will proceed.
The merchant will advise Oscar that the transaction was declined. Oscar decides to contact the Bank to ask why the transaction was declined. There are no fees charged because the transaction was not approved.
Conclusion
I myself can relate to both scenarios and although I hate paying the fees it some times is a life saver to have these transactions go through for one reason or another.
I know some of you are thinking “I never overdraw my account I’m very careful with my money!” You’re right a majority of people never even use this service but let’s remember Murphy’s Law “Anything that can go wrong, will go wrong”. You can never tell when this law will take effect. What if something goes wrong with your car and your using your debit card to pay for the repairs. What you don’t know is your mortgage was mistakenly debited twice from your account. This leaves you $10 to pay for a $150 repair. Wouldn’t you want the transaction to be approved. If you opt out it won’t.
The big question is why wouldn’t you opt in to this service? The good news is that it is free until you use it.
