January 28th, 2010

New Opt-In Overdraft Rules For Checking and Debit

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Starting July 1st, banks can no longer charge overdraft fees on debit cards or checking accounts without explicit permission from customers. Currently, banks automatically enroll customers in overdraft protection; the new reform gives consumers the choice to opt out of overdraft protection, and instead have their debit card declined or ATM withdrawal restricted if they overspend rather than be covered by the bank at steep fee. The choice to enroll in overdraft protection, which typically costs accountholders $30-$35 to cover overdrafts, is part of the government’s series of reforms on the credit and banking industry instituted last year.

Government officials cite that banks receive $25 to $38 billion a year in overdraft fees. For banks, this new rule will result in an enormous drop in revenue. With this much profit at stake, the nature of free checking accounts may change in the coming year while banks attempt to convince consumers of the benefit of overdraft protection in order to pad their bottom line. Overdraft coverage and other fees subsidize free checking accounts and banks profit from careless customers and frequent overdrafters.

Consumers should be prepared for banks’ possible reaction to the reform; don’t be surprised if banks start charging monthly fees on free checking accounts to recoup losses, and banks will likely bombard consumers via email, snail mail, phone calls, and even text messages urging them to sign up for overdraft protection. The New York Times blogged that a marketing company that works with 7 of the 10 largest credit card issuers is planning to target and market overdraft services to “higher value” customers, i.e customers with a propensity to overdraft.

Overdraft protection will most benefit customers who want the security and peace of mind of being covered by the bank in case they are at the cash register or ATM with insufficient funds. While overdraft protection means consumers don’t need to worry about being declined, in an extreme case, overdraft protection could result in hundreds of dollars in fees for multiple transactions on an overdrawn account. Overdrawing $3 for a cup of coffee and $2 for a pack of gum in a single day would slap you with a $70 fee.

Take note: the new rules don’t apply to overdraft protection for bounced checks and automatic, scheduled transactions, only debit card purchases. After July 1 for new accounts, banks will give consumers full disclosure of debit card and checking account policies, and will not be enrolled in overdraft protection without their permission; for existing accounts, banks can continue to keep customers automatically enrolled until August 15, at which point customers can opt out. Whether you think overdraft coverage is a privilege or predatory practice, consumers will soon have the choice to decide for themselves.


Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.


  1. Be Aware most banks state in their disclosures “we reserve the right to process in any order we so chose whether or not this causes more or less occurances of overdraft” which lately ment you got more fees because small items came in but with this new bill means they will be bouncing your rent/mortgage check if you opted out of being able to od your account. This is not stating you will never get OD fees but if it was a 1x debit card transaction that “item” will not get fees but it can make anything else get fees and re-occuring aka monthly items like your phone bill or cable bill would still be eligable for od fees. Dont make the assumption that with this bill you are now protected from od your account. Keep a check register and manage your money responsibly and you wont get od fees. And always remember to write down that morning cup of coffe on the way to work (I have od my account 3x by forgetting to write that down before)

    Kat at 1:57 am on February 28, 2010
  2. I wonder what your source is for “most banks state..” My local bank processes from smallest to largest ACH, then smallest to largest debit card transactions, then checks in check number order. That seems fair. You should get a better bank.

    mark at 4:11 pm on March 19, 2010
  3. I would like my transactions simply processed in the order they were transacted. Where can I find a bank like that?!!

    cybrdragon at 11:17 am on May 18, 2010
  4. Mark what bank do you go to then?

    I agree with cybrdragon!

    I am tired of banks with their hidden and confusing fees that are purely just to screw the American Citizen and have no logical reason behind them. So when I heard the government was going regulate these scam artists (banks, think about!)into being honest I was glad. But then the only thing the government said they had to do was give you the option to not use that service. It didn’t take care of the problem at all, it didn’t even side step it. I like the ability to overdraft. Every once in a while I will forget my money at home and have to use it or put everything back, which isn’t a good thing when grocery shopping. I want the service and just because I want it doesn’t mean the bank can take advantage of me.

    Heather at 11:22 am on November 24, 2010
  5. Will…. as you know the first sentence stated…. ”
    Starting July 1st, banks can no longer charge overdraft fees on debit cards…”
    1. NO debit cards should be charged OVER the amount in the account anyway, shape or form. That is was the actual definition of a “DEBIT” card happens to be. Seems that the “banksters” are con-fusing “Credit” or loan style banking with actual “debit” which is backed by money in the account.
    Another brand of “bank-robbery” by those who adjust everything to steal more money form everyone that they can get their dirty little hands on. They just con-fuse details until they got your money and more of it, always.

    I say “your” money because I have a “fireproof” mattress with a combination lock.

    Dave at 1:52 pm on April 11, 2014

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