Banks' hard sell: Opt in for more overdraft fees

[Robbien]

Source: MSNBC

You didn't think banks would forgo billions of dollars in overdraft fee revenue without a fight, did you?

As an Aug. 15 congressionally imposed deadline approaches to stop collecting fees for most debit card-related overdrafts, banks are blanketing account holders with pitches designed to entice them back into the costly programs. Consumers are seeing pop-up ads when they log in to their online banking accounts and getting paper notices in the mail. Some are even getting pitched at bank branches or ATMs.

The enticements hawk rebranded overdraft coverage with varied names -- "courtesy pay," "Buffer Zone," "debit card advance," or simply "debit card overdraft coverage." But most of the pitches evoke the same logic: "If you want your account to continue to work as it does today, you will need to let us know," as one Chase ad says.

Banks currently often allow consumers to spend money they don't have in their checking accounts through a swipe of their debit card in a store or through an ATM withdrawal. Then they charge consumers about $35 for each transaction that exceeds their account balance. New Federal Reserve will require banks to decline those transactions as of Aug. 15 unless consumers have "opted-in" for overdraft coverage.

Fearing a sharp loss in revenue, banks are making a hard sell to consumers to protect as much of that income as possible.

"NO FEE to keep Courtesy Pay Overdraft Protection coverage on your account. NO FEE if you never use it," brags a solicitation from the Arizona State Credit Union.

Read more: http://redtape.msnbc.com/2010/07/you-didnt-think-banks-would-forgo-billions-of-dollars-in-overdraft-fee-revenue-without-a-fight-did-you--as-an-aug-15-deadl.html

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Banks are using misleading scare tactics to push people into signing up. It is worrying that people are not aware they are signing up to get screwed.

The whole article is very long but a good read.

[Indydem]

1. I love overdraft protection

The only people who have problems with this is people who habitually cannot manage their finances and overdraft their account.

[Robbien]

3. As the article says "There is good overdraft coverage, and evil overdraft coverage."

With good coverage, you are borrowing your own money, which is relatively cheap. With “courtesy pay” or “automatic overdraft coverage” you are borrowing the bank's money, which is very costly.

There are three easy ways to provide good overdraft protection: You can link a savings account, credit card or line of credit to your checking account. Once you do, if you bounce a check or exceed your balance with a purchase, the money will be dragged from your savings, credit card or line of credit into your checking account to cover the balance.

There is a cost involved. Chase charges $10 for each automatic transfer from savings to checking, for example. But that's still quite a bit cheaper than $35. Also, courtesy pay can result in multiple $35 charges for separate transactions on the same day, while linked accounts lead to only a single charge for each day.

Also, it's important to note that courtesy pay isn't guaranteed. Banks cover charges at their discretion. Finally, banks that extended overdraft coverage grab their money the instant account holders make their next deposit, which can lead to more low-balance troubles. Consumers who take advantage of linked accounts can replace the money at their discretion.

[Gormy Cuss]

10. and the good overdraft protection is harder to find these days.

I've only had the linked-to-savings kind in the past and was shocked to find out that some of the bigger banks like BofA didn't have that option.

The so-called "courtesy overdrafts" are far more lucrative for the banks.

[Hugin]

4. If you don't need it why do you have it?

I don't think anyone really needs it...

[uncommon]

6. Agreed - there is an issue of entitlement when it comes to overdrafting -

obviously accidents in checkbook balancing happen, but overall one should know how much money is in the bank and how much they can afford to spend.

[uncommon]

2. My bank changed a lot of its rules about this --

if I overdraft $5 or less, there is no charge. If I overdraft more than $5, the same old charge applies ($35), however there is about a 24 holding period before they charge it and if in that time you bring your account positive, there is no charge. It works out well for me as I never intentionally overdraft but occasionally I do screw up the timing on something right before a deposit and now that doesn't cost me anything (since the only time my account ever overdrafts is the evening before a direct deposit).

Previously I would be charged $35 immediately, and for every charge that went in after the initial overdraft. That added up to something like $175 one time I wasn't paying attention.

[Roland99]

5. Chase sent out this brochure recently. I was dying laughing at it!!

They described some scenario where a person starts off with a $100 balance on the day, spends $50 on something and later spends $75 on something. Without overdraft protection, the $75 charge (like for groceries) is denied ("would you want to be embarrassed by having a purchase denied? Would you let your family starve?" seriously...it was like smacking the person around)

If a deposit was made after 4pm (or whatever time) there would be no overdraft fee charged. Otherwise, DING, $34 for the *privilege* of being able to buy those $75 worth of groceries today instead of tomorrow.



Wow, yeah, sign me up!!!

[Robbien]

8. I seem to be getting solicitation from Chase every two or three days

and I've never overdrafted. The article says banks are targeting those people who have frequently OD'd before. Inundating them with "offers" for this service.

Wouldn't be surprised if bankster's next step is to have people camped out at those people's homes begging them to sign on every time they enter or leave their residence. Kinda like the red kettle santa claus.

[FBaggins]

11. The law does not permit them to encourage you one way or the other.

They can only present the options and let you decide.

[daylan b]

7. Does this mean I have to 'opt in' with the local police

And if I don't they won't be able to arrest me for writing hot checks?

[UTUSN]

9. K&R #4 for, I already got my 2-pages letter from the credit union n/t