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BBB Release: DEBIT AND ATM CARD USERS: New Overdraft Rules


Anchorage, Alaska – July 28, 2010 – Cardholders who overspend can now choose how overdrafts will affect their accounts. On July 1, the Federal Reserve's new overdraft rules for debit and ATM cards went into effect.

Overdrafts occur when consumers make purchases or ATM transactions, but don't have enough money in their account to pay for it. Most banks, credit unions and financial institutions charge fees each time the account is empty, causing further debt.

§ Standard overdraft practices. Most banks will cover overdrawn accounts for a flat fee of about $20-$35. Each time a debit card purchase or ATM withdrawal is made on an overdrawn account, the bank will charge an additional pre-determined fee.

§ Overdraft protection plans. Banks may offer a line of credit or use savings account funds to cover transactions on overdrawn accounts. Banks still typically charge a fee for each overdraw on an account, but these overdraft protection plans may be less expensive than their standard overdraft practices.

Better Business Bureau serving Alaska, Oregon and Western Washington explains the new rules concerning overdrafts:

§ Consumers can choose how the bank will deal with their overdrafts. Previously, some banks would automatically enroll account holders into standard overdraft programs and charge them if the account was overdrawn. Now, the bank has to ask permission to charge and consumers can "opt-in." Consumers have until August 15, 2010, to "opt-in;" otherwise, transactions will be declined on charges that exceed the account balance. Overdrawn account holders will not be charged an overdraft fee, but will also not be able to complete purchases or make withdrawals.

§ Banks must provide up-front information about how they treat overdrafts. On existing accounts opened before July 1, account holders should receive a notice from the bank explaining standard overdraft practices and asking them if they want to continue being charged overdraft fees or have purchases declined when funds are insufficient. On new accounts opened after July 1, consumers will be invited to "opt in" or "out-out" when filling out the initial paperwork and can decide to change preferences at any time.

§ Warning: The new rules do not cover overdrafts resulting from checks or automatic bill payments. On these transactions, banks may still automatically enroll account holders to be billed for overdrafts.

BBB advises consumers to contact their bank, credit union or financial institution for details on standard overdraft practices. Always read monthly statements, updates and other policies to be aware of account terms and fees. If terms are not satisfactory, shop around for another bank. Check out businesses with BBB at www.bbb.org.


About your BBB serving Alaska, Oregon and Western Washington: Better Business Bureau is a neutral not-for-profit organization with the mission to advance marketplace trust. BBB is supported by BBB Accredited Businesses and provides ethical business standards, BBB Reliability Reports, Charity Review Reports, complaint handling, marketplace events and tips. For more information, contact BBB or visit www.bbb.org.
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