Should you Opt-in or Opt-out?

Imagine paying $30.24 for a kids chicken finger meal from Sonic Drive-in. That is exactly what can happen if you found yourself in the position of not having enough money in your checking account to cover the original purchase of $3.24. If you fall victim to your banks overdraft protection it will cost you more in the end. According to the banking industry trade group the American Bankers Association, banks charged an average of $27 per overdraft and pocketed an estimated $38.5 billion dollars in overdraft and insufficient fund fees in 2009. While these fees came from only a small percent of bank customers. Recently several consumer advocacy groups and lawmakers have petitioned the Federal Reserve to look into the current overdraft policies in place by many U.S. banks.

On November 12, 2009, the Federal Reserve Bank issued an amendment to Regulation E. The amendment became effective July 1, 2010 for new bank customers and will become in effect for existing bank customers on August 15, 2010. Regulation E sets forth rules, procedures and liabilities of financial institutions for electronic transfers (EFT); this regulation also governs the issuance and usage of debit cards.

You are probably saying at this point so what does this have to do with me, to honest a lot. You may or may not have noticed that your financial institution has been trying to get you to Opt-in. That is because of the recent amendment to Reg E on August 15, 2010 existing bank customers will have to decide whether they want the bank to cover their checking account with overdraft protection in case there is not enough money in the account at the time of purchase.

Up until this point, many bank customers have expressed aggravation, with the current practices of banks concerning their overdraft policies. Most consumers when asked said they do not understand how overdraft programs work according to a national poll by the Consumer Reports National Research Center.

Bottom line here is what you need to know, if you chose to opt-in you have to do so by the August 15 deadline. If you do not then your account will automatically be opted-out of overdraft protection. That means that if you attempt to make a purchase with your debit card and do not have enough money in your account to cover the purchase your purchase will be declined. The good news with is that your account will not ever be put in a negative situation. This does not apply to any automatic payments that are set up on your checking account such as rent or mortgage payments. Is this a good thing or a bad thing? That is for you to decide. I have been doing some research on the matter and I found some great articles on the subject that will be of assistance

http://moneyfor20s.about.com/od/managingyouraccounts/a/overdraft_prote.htm

http://nwnc.bbb.org/article/deadline-for-consumers-to-opt-in-for-overdraft-coverage-approaches-20494

Here is a link to a PowerPoint slide show from the American Bankers Association that does a good job of explaining the new regulation. Please consider the source it is for bankers.

http://www.aba.com/aba/documents/press/ReporterOverdraftBriefing52610.pdf