Starting in mid-August financial institutions were unable to assess any overdraft fee unless the consumer has not opted into the financial institution’s overdraft program. At an average of $30 a pop, we’re not really going to miss those fees much, are we?
With billions of dollars of revenue on the line for banks and credit unions (over $38 Billion in 2009 just for banks), it’s no wonder that we here at Debt Reduction Services Inc have seen some pretty fancy and creative marketing materials designed to entice consumers into opting in to the bank’s or credit union’s overdraft program.
These slick flyers and brochures tout the benefits of maintaining a fee-based overdraft protection account. The top two so-called “advantages” usually include having access to overdraft in cases of emergencies and avoiding the embarrassment of having your purchase declined while in line at a store.
First of all, depending upon a $30-fee-per-incident program (like overdraft) as an emergency plan is as ridiculous as using a payday loan to “fill” the financial gaps before your next paycheck. Both options take an obviously bad situation and make it far worse.
Second, if your afraid of the embarrassment caused by a declined debit card, take that fear and use it as motivation to spend at least 15 minutes every week getting to know your finances better. Set aside 15 minutes every Saturday morning or Monday night, or Thursday at lunch (make it a habit) and ensure that your account is balanced and determine what bills need to be paid in the upcoming week and how. This 15 minute “financial check-up” can do wonders for your financial health, both in preventative and restorative terms.
Finally, when it comes to options to overdraft, consider (probably in order) the following as a few of several possible solutions:
- Planning your spending (budgeting) so that you don’t go near your account balance in the first place;
- Dealing emotionally with the possibility of a declined purchase;
- Linking your checking account to a savings account so there is no charge (or only a minimal one) for overdrafting your checking;
- Linking your checking account to a credit card that you would then pay in full if you overdrafted your account, thereby avoiding interest charges.
As with most financial challenges, controlling your own money is the key to avoiding problems (and fees) related to overdrafted accounts. Remember, if you’re not planning how to spend your own money, then be warned that someone else is likely planning a way to take it from you. And with overdraft fees, there is no benefit to you that you could not have improved upon with just a few minutes of attention to your finances each week.
Director of Education