You’ve probably heard in the news recently about the new overdraft protection opt-in requirement for account holders at banks and credit unions. Undoubtedly, you have been urged by some commentator on the national news network of your choice about the importance of not opting in. Before you jump on this bandwagon, read this article.
First, here’s a brief summary of how overdraft protection works… Let’s say John Smith has $100 in his account. If a $150 item – whether it is a check, ACH debit (electronic payment), ATM withdrawal, or debit card purchase – tries to clear John’s account, there isn’t enough money, therefore the transaction is denied. If John was enrolled in a program where he had overdraft protection, the $150 item would be paid, and John would be charged a fee for this service (the fee would most likely be much higher from a bank than a credit union…cheap shot, I know…just kidding, banker friends).
Ok, so now that you know the basics, let’s compare overdraft protection as it exists now with overdraft protection as it will exist during the second half of 2010.