Posted
by Grant Bissell
on Tue Jul 20, 2010
Last updated
Jul 20, 2010
Overdraft protection on your debit card can be a lifesaver in a pinch. But it can also cost you a lot in fees.
New Federal regulations now require banks to allow customers to choose whether they want overdraft protection. If you decide you don't want it, your card will be declined if you try to spend more than what's in your account. If you accept, you're basically granted a short-term loan that will cover your purchase.
Consumer advocates accuse some banks of using scare tactics to draw customers into overdraft protection. But Travis Ford of the Missouri division of finance says don't be fooled by language that may cause alarm.
"The banks are probably and the credit unions, making the service sound as attractive as possible because it's a big source of revenue for them, billions of dollars nationally. So they'd like consumers to have this coverage but consumers need to know it's their choice," says Ford.
Current regulations only require banks to get new customers' permission before charging overdraft fees. But starting august 15th, the rule will extend to existing customers as well.
Overdraft fees can differ depending on where you do your banking, so double-check before making your decision.
