Overdraft Coverage Survey!

[will85w4]

Ok, so I'm just interested to hear everyone's opinions about overdraft coverage. The new changes to Regulation E that the government has put in place go into effect on August 15th, 2010.

So, the question is...

If your bank gave you the choice of opting in or opting out of overdraft coverage, which would you choose?

Before we start, here are some really basic definitions for the sake of this survey/conversation that I'm sure will start from this...

Bank - Just kidding...

Checking account - just kidding again...

Opt-In to Overdraft Coverage - This means you want your bank to pay items that may cause your available account balance to go into the negative causing an overdraft.

Opt-Out of Overdraft Coverage - This means you DO NOT want your bank to pay items that would cause your available account balance to into the negative and you would not pay any fees.

Overdraft - When your available bank account balance goes negative and the bank paid the item that overdrew the account.

NSF (Non-Sufficient Funds)- The item would have caused an overdraft, BUT the bank returned the item instead

Overdraft Fee(s)- Just think of an overdraft as a VERY expensive loan...banks charge fees for "loaning" or paying items that cause your available balance to go negative...some banks are upwards of $40!

NSF Fees - This is what the bank charges when you write a check that you do not have the funds available for in your account. the item is presented for payment to your bank from the other party's bank and returned. Banks charge fees for this too (usually same as Overdraft fee(s))

Overdraft coverage- This usually comes standard with a basic checking account at most banks. It is pretty much at the bank's discretion of how far they will allow you to overdraw your account before they decline your transactions (some banks base this on relationship with bank, balances, length of time with bank, etc...some banks don't do this at all, if you have $0.00 in your account, you will be declined). This is a double edged sword here because it can be a good thing for the consumer (you are stuck on the side of the road and need gas, you know you don't have the money but are willing to pay the fee so you can get to your destination) and it can be a bad thing for the consumer who doesn't keep track of their spending (swipe the card until it declines...) Don't confuse OVERDRAFT COVERAGE with OVERDRAFT PROTECTION!

Overdraft protection- Overdraft protection is a product that banks offer, usually in the form of a credit product like a personal line of credit or a deposit product like a savings account. Overdraft protection is a good thing to have if you A) have the credit and income usually required to obtain it, or B) have the money to put away in a savings to use for this purpose. Overdraft protection is a very good way to avoid paying costly overdraft fees (you usually still pay a small fee for this service, but it's better than $40!)

Regulation E- Government regulation in place designed to protect consumers from electronic forms of fraudulent activity(i.e. you live in California, never left the state, and you get a weird charge from a Florida Wal-Mart) also gives consumers rights to billing disputes (i.e. gym charged you twice, merchant charged wrong amount to card, etc...) The newest changes to Regulation E are in regards to overdraft coverage.
Regulation E generally covers the following types of transactions:
ATM, Debit/Check Card purchases, ACH (Pre-Authorized Debits/Credits "Automatic payments"), Telephone transfers, and some online banking payments (depends on how the bill/payment was made, either A) electronically, which would make it fall under "pre-authorized" or B) in paper form, some banks mail checks to the companies you specify, which makes it a whole other type of fraud/dispute claim.

 

[will85w4]

Opt In for me. I don't overdraft my account but just in case someday if I need that option available to me, I have it.

 

[loosecannon]

you have to VERY careful if you decide to overdraw your account in an emergency.

depending on the laws in the state you live in, your bank will place your charges from a given day in order from largest amount to smallest amount, regardless of the order in which the charges were made.

this can really screw you over if you dont know how it works.

here is an example of what im talking about:

say you have 100 dollars in your checking account on wednesday morning.

during the day, you make a 20 dollar fuel purchase, a 55.00 charge at the grocery store, a 2 dollar charge at the 7-11, then realize you forgot cigarettes and make a 6 dollar charge at the same 7-11.

later on you make a 15 dollar purchase at the video store or whatever.

this would leave you with a 2 dollar balance at the end of the day.

later that same night you get a flat tire and realize that your spare is flat.(shame on you! LOL)
luckily you are right next to a service station that repairs tires.

you get your tire repaired for 25 dollars, and thank goodness that you are able to make that charge without being declined.
you know that you will incur an overdraft fee (say 35 dollars) but are willing to take the hit to get home safe.

you wake up the next morning to check your account balance and expect to see it overdrawn by 33 dollars. (35$ fee minus the 2$ you had in there)

you are horrified to discover that your account is -128 dollars!!!

this is because when the bank does its processing at the end of the day; they start with the 55 dollar charge, then the 25 dollar charge, then the 20 dollar charge which at this point leaves you with a 0 dollar balance.

the 15$, the 6$ and the 2$ charges each cost you a 35$ overdraft fee.


yes, overdrafting your account can save your butt in a moment, but it can screw you bad if you dont know how the banks do things.

the moral of the story is to always use a hand written ledger of your purchases, and dont overdraw your account if you can avoid it.

also, dont just trust your online banking to give you the correct account balance.
some merchants put a temporary charge on your account just to make sure its active, and then remove the charge until they are ready to settle up with the bank a week later.
if you didnt write down the charge when you made it, your account might not show that the charge was ever made for a week or more.
by that time you might have cut it close and ended up in a mess worse than the one i just described.

banks are sneaky and they make TONS of money off of this stuff.
CYOA cover your own ass!

how do i know all this?
my wife and i had some communication problems when we first got married and joined our accounts.:blushing:
LC

 

[will85w4]

They see a mortgage payment as being more important than that $4 cup of starbucks. Yes, it is a nice revenue generator for banks, but it's also a good thing for customers. Would you rather have your mortgage payment returned NSF by the bank which will cause more problems than a check written to the grocery store for $10. Yes, you pay fees on both ends usually anytime you bounce a check, but I would rather have a mortgage get paid and save my credit than have a $10 check paid and have my mortgage check get returned.

 

[loosecannon]

i am not offering an opinion either way.

i am merely cautioning people on what can happen when you overdraw your bank account.
LC

 

[Captain Kilowatt]

My overdraft protection is simple. Any overdraft amount is simply automatically transferred from my VISA account to my chequing account and rounded up to the nearest $50 with no additional fees. If I overdraw by $30 I end up with $20 in my chequing account and a $50 cash advance on my VISA bill. I like my bank.

 

[C2]

Mine just transfers the money from my savings account, to the penny. No fees, no fuss.

I have not considered what would happen if the savings was NSF...

But I don't use any sort of electronic transfers otherwise. It's either paper check or CC. That is it, so the o nly thing that could overdraft is if I write a check. I don't have ATM/Debit cards. I plan in advance and visit the bank every two weeks to deposit my checks and withdraw the cash I need - usually $40 goes a couple weeks, but I often carry $100.