| Overdraft protection is a system whereby a bank will | | | | checking accounts in recent years, it is much easier to |
| cover (pay for) any outstanding charges not covered | | | | overdraft your account if your balance is running low. |
| by the bank account holder's current balance. In | | | | That is because your bank will no longer reject the |
| exchange, the account holder must pay the bank a | | | | charge like they used to in the old days when you |
| fee of $20 or more. | | | | wrote too large of a check. Instead, they just accept |
| On the surface, this sounds like a good thing. After all, | | | | the charge, cover it, and collect a nice, healthy fee. |
| the bank is "protecting" the account holder by not | | | | Are we as consumers better off with overdraft |
| allowing his or her charges to be rejected or to have | | | | protection? It depends upon whom you ask. But, there |
| checks bounce. However, many critics believe that | | | | is no doubt that banks are making a mint on the new |
| overdraft protection programs are just a | | | | arrangement. |
| cleverly-disguised way for banks to make more | | | | Overdraft Fees Add Up Quickly |
| money. And, they could be right: in recent years, banks | | | | These days, many consumers checking their bank |
| have been making about $25 billion in revenues | | | | statements at the end of each month realize that they |
| annually off of overdraft fees alone! Clearly, overdraft | | | | paid $50, $100 or more to their bank for the privilege of |
| protection is big business for the nation's banks. | | | | having a few overdrafts covered. Consumer anger |
| Life Before Protection - Were Things Better or Worse | | | | about the situation is on the rise, as evidenced by new |
| for Consumers? | | | | bills being passed by Congress which are designed to |
| Overdraft protection is a relatively recent invention. | | | | raise consumer awareness about the choices they |
| Until a decade or so ago, overdraft protection was not | | | | have when they enroll in these programs. |
| an option for bank customers. Instead, when a person | | | | Finding Banks with Free Overdraft Protection |
| tried to write a check that exceeded the current | | | | While most overdraft programs are free in terms of |
| balance of their checking account, the bank would | | | | enrollment and monthly usage, they can end up being |
| reject the check. The person who wrote the check | | | | very costly choices for bank customers who make |
| would then be subject to fees of up to $100 or three | | | | more than one or two overdrafts a month. |
| times the amount of the check. | | | | However, some banks now are going a step further |
| Nowadays, consumers who are enrolled in overdraft | | | | by not charging their customers any overdraft fees at |
| protection plans and charge too much or write checks | | | | all - even if they have an overdraft. Of course, many |
| that are too large for their balances (up to certain | | | | of these banks limit the amount they will cover before |
| allowable limit) can rest assured that the charge will be | | | | rejecting a pending charge outright (e.g., if your account |
| covered by their bank. In that sense, overdraft | | | | goes into the "red" by more than $250 or $500 for |
| protection is a wonderful thing. | | | | given transaction). But, most overdrafts are for less |
| On the other hand, with overdraft protection in place | | | | than $50, so this is rarely a problem. |
| and with the advent of debit and credit cards linked to | | | | |