Debit Card Overdraft "Service": As Though Government and Bankers Haven't Already Screwed Us Enough

At least my credit union isn't THIS disingenuous.
Five months ago, Bank of America announced that it was no longer going to charge overdraft fees on debit card transactions.  On August 15, BOA, along with every other bank and credit union, will no longer have the option of not charging such fees if customers "opt in". I'm trying to figure out how this is better for me.

Update: 8/2/2010 - 9:31 PM: On second thought, maybe my credit union is the problem.

Update 8/3/2010 - 2:30 PM After all the confusion, fostered by the federal government, I am just fine.
In March 2010, Bank of America decided that it was going to be nicer to its customers.
Bank of America said [recently] that it was doing away with overdraft fees on purchases made with debit cards, a decision that could cost the bank tens of millions a year in revenue and put pressure on other banks to do the same.

They no longer have that choice.  Someone put pressure on Congress.  Now, as of August 15th, BOA will be required by federal law to screw their customers.  My credit union will have the same obligation.

I called my credit union this afternoon after I got a notice in the mail saying that they were going to start charging me twenty collars for every debit card overdraft transaction, instead of the interest that they normally charge. According to new federal legislation, this requirement goes into effect on August 15th, 2010.

I often go into overdraft at the end of the month. With several transactions.  But the most interest I've ever had to pay during any overdraft period is less than $5, and it's usually much less than that. I asked my credit union representative if I could opt to keep that sort of overdraft coverage. I was told that I could not. I would not be so fighting mad if I thought that the federal government really did this because they thought they were helping me.

Update: 8/2/2010 - 9:31 PM
The more I look into this, I'm wondering if my credit union is just taking advantage of--shall we say--an "opportunity". It's looking perhaps like they are NOT required to charge a flat fee for opt-in overdrafters. This article links to some banks that allow you to (a) allow another account to be tapped to cover the overdraft, and/or (b) to charge a small (around 7-8%) annual interest rate. I guess I'll have to visit my credit union in the morning. This ought to be interesting.

Update 8/3/2010 - 2:30 PM I visited my credit union. They said that dozens of people have been in today with very similar concerns that I have had, but that (at least in my case) there is nothing to worry about. My credit union has what is called an "overdraft line of credit", which my account is entitled to, that still covers overdrafts up to several hundred dollars. Not everyone has such a line of credit, some because they don't want it, and others because they don't qualify.

It's not until my overdraft line of credit is maxed out does the "overdraft service" kick in. I've never come close to having that happen. I asked my credit union rep why something about the line of credit couldn't have been put on the scary-looking notices that were sent out. He said that he thought it was because of the verbiage that the federal regulation required, but that at any rate the National Credit Union Association mailed out ALL of the notices, simply pasting the appropriate letterhead on the top of the page and credit union director signature in the appropriate place on the page. That left my credit union with very little leeway in how it could notify people like me about our lines of credit.


  1. I work for a local credit union and this law is infuriating. The fact that the federal government has dipped even further into our policies and procedures decreases our local accountability and increases our federal dependence. However, this new change shouldn't affect you if you already have overdraft protection.

    Let's say you have a $500 limit on a line of credit for your checking account. If you overdraw and have to access any of that limit, you will only be charged the normal interest you would have been before this law took effect. The only way you will be charged the $20 overdraw fee is if you've already maxxed out the limit on your line of credit and still have transactions coming in.

    I can't say that this is how it works across the board, but it is the way it works at my credit union.

  2. Tanner: That's good to know. I'm going to visit my credit union this morning, and I'll post another update.

  3. I've been browsing articles on blogspot about overdraft fees and I found yours. I've been interested in this topic for some time now. I feel like the financial industry intentionally takes advantage of the disadvantaged. I've concocted a short (2 question) survey to look specifically at overdraft fees and level of income.

    Would you mind terribly if I leave this comment soliciting responses from your readers?

    The instructions are simple:
    1) Take the survey
    2) Give these instructions to everyone you know

    Thanks a million,
    Patrick Caldwell

  4. Cool, there is actually some good points on this post some of my friends might find this relevant, will send them a link, many thanks.


  5. Hi Frank, its been a while. The real complaint was from consumer groups that complained about the high cost of overdraft fees on individuals who didn't have the credit limit you referenced or had maxed it out. Some individuals would make a couple of mistakes and end up with hundreds of dollars in charges before they could correct the problem.

    The regulation just means that the customer has to opt into the program, which, surprisingly, is popular with quite a few customers. The cost of $20 dollars for an overdraft is often much less than what would be charged by a payday loan place.

    Good credit unions try to explain the process and educate their members on how much the program actually costs them. They also look for less costly means of providing a little buffer such as home equity lines of credit tied to the checking account, etc.

    Take care and happy spending.

  6. This blog having very good and needful information related to Debit card. I am very thankful to you for provide very attractive information.


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