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Overdraft 'opt-in' deadline is near

If you don't opt in, your debit card could be declined if you're out of money. But you won't pay a bank fee.

By Karen Datko Aug 13, 2010 5:09PM

This post comes from Mark Huffman at partner site


Chances are you've gotten a friendly letter or two from your bank in recent weeks, urging you to "opt in" to overdraft protection so "you can continue to enjoy" the service.

Here's why: The last of a series of new federal overdraft rules goes into effect Sunday, Aug. 15, after which banks can no longer automatically include customers in an overdraft "protection" plan that smacks them with a hefty fee when the bank makes good on a debit or ATM card overdraft. 


Those who decide not to opt in will have their cards declined when a debit or ATM transaction would overdraw their account, but will not pay a fee. (The new rules don't apply to checks and automatic withdrawals. Banks will still cover those types of overdrafts and charge a fee.)


Marketing blitz

The banks have come to rely on the revenue from the fees  and are worried about losing them. In recent years, consumers have paid about $20 billion per year in overdraft fees, which average $34 per incident.

In fact, when the Federal Reserve drafted the new rules preventing banks from making overdraft coverage automatic for all customers, consumer advocates were certain that most bank customers would say "no thanks." Complaints about overdraft fees, famously making a $5 latte a $40 purchase, have filled pages on


But a new report from Mintel Comperemedia, a service that studies direct marketing, suggests that banks might not have as much to worry about as they thought.

Mintel found that 26% of consumers said they have opted in for their bank's standard overdraft services and another 26% said they planned to do so.


Mintel said the banking industry has engaged in a marketing full-court press to achieve those results, incorporating direct mail, e-mail, Web and phone campaigns to encourage consumers to remain in the program.


However, the Center for Responsible Lending says there are a number of less-costly alternatives.


"To avoid costly fees under standard overdraft coverage, customers can sign up for lower-cost overdraft alternatives at their bank, such as linking a savings account or credit card for backup funds, or applying for an overdraft line of credit," the group says on its website.


CLR maintains that the banks' recent marketing blitz has been targeted at the most vulnerable consumers because they are the ones most likely to have incurred overdraft fees in the past. The CLR says banks have used scare tactics or incomplete information, for instance failing to emphasize that customers can have debit card transactions declined at no cost rather than incur a $34 overdraft fee.


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