I have been received countless offers from Chase and other banks to sign up for ‘overdraft protection’ all Summer long.  What is this all about you might ask?  Well as usually the big banks are trying to take advantage of you and me, again.  The new financial reform bill passed last Spring requires banks to checks  if there is not enough money available in the account  without going over the limit.  The same applies to debit cards.  If you try to spend $10. and you only have $9. in your account the transaction must be denied.  This is actually a very good thing.

In the past, the bank had the option of allowing the transaction to be approved and would then charge the customer on average $39. for overdraft fees.  This fee applied even if you were over by as little as $1.  Since most people don’t know exactly how much money they have left in their account, this happened without them being fully informed.  The banks made an estimated $1.8 billion on overdraft fees last year alone.  The government is protecting the consumer against greedy banks.

The banks didn’t like this very much because they stood to loose a lot of money in fees.  Their solution (or work around the law) was to get customers to ‘AGREE’ to Overdraft Protection.  This Overdraft Protection Agreement then allows the bank to continue approving overdrafts and subsequently charging overdraft fees just like they used to.  The sales material isn’t perfectly clear about the reason you wouldn’t want protection, and tries to sell the customer on all the benefits. Most customers are totally confused and don’t understand the simple difference between the two options.  The good news is that you have to ‘Opt-In’ for the overdraft protection and associated fees, or the law automatically requires the account to be set up to avoid unwanted fees.