Consumers tell banks: Decline my card!

Maybe Americans are getting smarter about their financial choices and how banks have taken advantage of them.

There's proof in a new survey by the National Foundation for Credit Counseling. It found (.pdf file) that 74% of respondents won't be opting in for so-called overdraft protection, which allows banks to charge customers a hefty fee for the privilege of spending money they don't have.

Rather, consumers are saying, "Decline my card. Please."

As you may recall, banks in the past have automatically allowed overdrafts to go through and charged a fee, usually $27 to $35. Starting Aug. 15 (the deadline was July 1 for new customers) banks will need you to "opt in" before they can provide such overdraft protection to debit card and ATM transactions. (Checks and automatic withdrawals are not covered by this new federal rule.) Banks, which made about $20 billion from those fees last year, have been badgering customers to opt in.

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The NFCC's July online poll shows that only 26% of bank customers are choosing that route. While we think that's great news, the NFCC thinks that number is way too high.

"It is disturbing that this many people live so close to the financial edge. Anticipating that they will overdraw their account, they are willing to exacerbate the problem by paying a fee to have their purchases approved. The real answer lies in examining the root problem and resolving it, as continued overdrafts can result in some significant financial damage," Gail Cunningham, spokesperson for the NFCC, said in a press release.

How can you avoid overdrafts? The NFCC offers this advice:

• Keep track of the money in your checking account. Write down all debit card and ATM transactions in your check register. Yes, it's more work, but you can do this.
• Keep some padding in your account. An extra $50 or $100 should be enough.
• Sign up for bank e-mail or text alerts that tell you when your balance is low.
• Link your checking account to a savings account or line of credit. My bank offers this service at no cost to me unless I overdraw my account. Then it's a $10 fee.
• If bills are normally due before payday, ask creditors to change the payment due date. "You may have to pay a little extra interest to cover the gap for the first month, but over time this step should help to organize your finances," the NFCC says.

So, it looks as if many consumers are making a smart choice. But before we get all giddy about the new survey results, let's review some findings from the NFCC's annual survey of financial literacy (.pdf file). The results are from March.

• While 43% of adults now keep better track of their spending, 56% don't have a budget.
• 33% save nothing for retirement.
• 30% have no savings whatsoever.
• 28% don't pay all bills on time.
• 65% hadn't ordered a free credit report in the last year. (Read "How to get a credit report for free.")

How about you? Have you opted in for so-called overdraft protection or are you willing to have your card denied when your account is on empty?

More from MSN Money:

• Some people can't get credit? Good!
• Banks want you to 'opt in'
• Should you opt in for overdraft protection?
• Watch for sneaky new bank charges
• Could cell phones replace credit cards?
• It's here: The $9 bank statement