The Edmond Sun reports that beginning this summer, new rules set by the Federal Reserve will affect debit and ATM card users if they rely on overdrafts.
Eileen St. Pierre, Oklahoma State University Cooperative Extension personal finance specialist, said bank account overdraft fees are a large revenue stream for banks and a source of unexpected costs for many consumers.
"An overdraft occurs for a debit card purchase or an ATM transaction when there is not enough money in the account to pay for it," St. Pierre told the Edmond Sun. "For a fee, your bank will cover the cost when you become overdrawn. This fee can apply each time you overdraw your account so it is possible to incur hundreds of dollars in overdraft charges in one day if you are not careful."
The new rules take effect on July 1, prohibiting financial institutions from charging overdraft fees for ATM and one-time debit card transactions, unless consumers consent or opt in to the overdraft service for those types of transactions.
St. Pierre says two types of overdraft services are available — one is a standard overdraft service, where a bank covers the transaction for a flat fee of about $20 to $30 each time an account is overdrawn; the other is an overdraft protection plan, where a bank may offer a line of credit or a link to a savings account to cover transactions when an account is overdrawn.
The new rules:
- A bank must first get your permission to apply overdraft services to everyday debit card and ATM transactions before overdraft fees can be charged.
- For existing accountholders who do not opt in, as of Aug. 15, the accountholder will not have overdraft protection for debit-card and ATM transactions. These transactions will be declined when not enough money is in the account, but you will not be charged overdraft fees.
- New accounts opened on or after July 1 cannot be charged overdraft fees by the bank for everyday debit-card and ATM transactions, unless the accountholder opts in. If the account is opened before July 1, then the owner of the account is to be treated as an existing accountholder and must decide if he or she wants to opt in.
- The new overdraft rules allow for flexibility, allowing an accountholder to opt in or cancel at any time.
- The new rules do not cover checks or automatic bill payments.
