Courtesy Overdraft Protection Opt Out
An overdraft is what occurs when the total amount of the charges you make against your account exceeds the current account balance, causing the account to go into a negative balance (a.k.a., to go 'into the red.').
For a list of banks that won't charge you an overdraft fee even if you overdraw your account, check out http://escape-overdraft-fees.com/ . For more information on this topic, also see http://www.squidoo.com/how-to-avoid-abusive-overdraft-charges-by-banks.
In the case of most banks today, customers are enrolled in courtesy overdraft protection programs that 'protect' them from any pending debit, credit or check payment from being denied due to their having insufficient funds in the account.
The shadow side of these overdraft protection programs, of course, is the huge fees associated with these courtesy services. Even a $5 overdraft can result in the account holder paying an overdraft fee of $25 or more for EACH transaction that is made after the account is overdrawn. These can get expensive for consumers: just two overdrafts can cost a customer $50 to $70 in a single day! These fees can really add up over the course of a month.
Overdraft fees are big business for U.S. banks. Together, they raked in over $25 billion in overdraft fees last year alone. This is a lucrative business model and they want to do everything they can to keep the gravy train moving.
Since courtesy overdraft protection programs were introduced by banks around a decade ago, most financial institutions have increased participation rates by their customers to nearly 100%. How have they done so? By making the programs opt-out.
An opt-out program means that an applicant is automatically enrolled without being given the opportunity to opt in, or to actively choose their participation. In the case of an opt-out program, a person must specifically indicate that they do NOT want to participate in it. Without such an indication, the person is automatically enrolled ' often without their knowledge or awareness.
Many customers have come to find overdraft protection programs as being very hard on their pocketbooks and have wanted to opt out of them completely. These people would rather have a pending debit or credit transaction denied at the point of purchase if their current balance will not support it than have to pay exorbitant fees to their bank.
Unfortunately, many banks make the option for courtesy overdraft protection opt out fairly difficult to attain. They require a customer to meet certain conditions if they are to get themselves out of the program.
If you want to opt out of your bank's program but don't know how, here are some guidelines:
1. Locate and read your account terms and conditions. You should be able to find a copy online or with your original application papers. Find out whether you meet the conditions.
2. If you cannot find the terms and conditions paperwork, contact a representative and inquire about their opt-out policy. This will differ greatly depending upon the institution.
Even if you are allowed to opt out of the program, you may be debating whether this is a good idea. After all, who wants to face the embarrassment of having a pending charge denied while at the supermarket, coffee shop or clothing store? Better to just keep paying the fees, right? Not necessarily.
An alternative to opting out is to find a bank that will never charge you an overdraft fee ' even if you overdraw your account. They do exist and they are looking for new customers. In the case of these non-overdraft-fee banks, they will honor a pending charge not covered by your current balance but will not charge you an overdraft fee for doing so ' ever. This can be an ideal alternative to staying with your current bank if you are dissatisfied with their overdraft policy.
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