SILVER SPRING, Md. (8/3/10)--Twenty-six percent of Americans surveyed say they intend to opt-in to overdraft protection in spite of there being a fee charged for the service, said the National Foundation for Credit Counseling (NFCC). Although most overdrafts from paper checks and automatic payments will continue to be covered (for a fee), consumers must now opt-in to authorize this service for ATM and debit card transactions made at a point of sale. “It is disturbing that this many people live so close to the financial edge,” said Gail Cunningham, NFCC spokeswoman. “Anticipating that they will overdraw their account, they are willing to exacerbate the problem by paying a fee to have their purchases approved. The real answer lies in examining the root problem and resolving it, as continued overdrafts can result in some significant financial damage.” As of Aug. 15, existing and new customers of financial institutions must sign up for overdraft protection before a financial institution is allowed to charge the customer a fee for clearing the transaction. If consumers do not notify their bank or credit union, they will not be covered. No action is necessary from consumers who do not wish to opt in. Industry studies show that the average overdraft fee is $27, with about half of the more than $37 billion generated in fees in 2009 coming from debit card and ATM overdrafts. Banks are anxious to retain these fees, with many having launched significant campaigns encouraging consumers to opt in, NFCC said. Credit unions can tell members to:
* Keep your check register current, recording all withdrawals and balancing often. Be sure to note all ATM and debit card transactions along with any paper checks written on the account. * Link your checking account to your savings account. In case of an overdraft, the money will be automatically taken from your savings with little or no fee attached. * Pad your checking account by carrying a balance that you will not likely exceed. Most people spend a similar amount each month. If possible, keep an extra $100 in your checking account to cover unplanned expenses. * Use technology. If your financial institution offers it, sign up for e-mail or text alerts that notify you when your balance is low. * Reach out to your creditors. If payment due dates do not coincide with paydays, contact your creditor and request a due date change. You may have to pay a little extra interest to cover the gap for the first month, but over time this step should help to organize your finances. * Get help managing your finances. Reach out to an NFCC member agency by going online at National Foundation for Credit Counseling (use the link) or to be automatically connected to the closest agency, call 800-388-2227. For assistance in Spanish dial 800-682-9832.
“Even though there may be a small embarrassment if a transaction is denied, the consumer should evaluate this inconvenience against the potential savings and value of solving the underlying financial issue that resulted in the overdraft,” Cunningham said. “Know that if you have already opted in, you can always cancel the program.” NFCC’s July Financial Literacy Opinion Index was conducted via the homepage of its website from July 1 though July 31 and answered by 2,089 respondents.