Monday, February 22, 2010

Overdraft "Protection"

A bunch of new laws are going into effect to try to regulate bank fees. One of the most important of these is requiring that people opt in to "overdraft protection." Overdraft protection is where the bank will kindly let you put charges on your debit card even when you don't have any money in your account. They then charge a very large fee for the "privilege." Banks point to the fact that you may need cash during an emergency, but I doubt that the $40 billion dollars a year they make from overdraft fees are all because of emergencies.

Without overdraft protection, your card will just be declined if you don't have cash left (which makes sense). Starting now, banks will be required to receive permission to allow overdraft protection for debit cards. Since this is a major source of revenue, they are likely to start sending lots of advertisements attempting to convince people to get this protection. I highly recommend ignoring the ads.

More information from the New York Times:

Banks Pressure Customers to Keep Fees Rolling In

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