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Checking Account Overdraft Protection: Would You Pay $30 for a Latte?

June 08, 2010

By Barbara Marquand | Money Rates Columnist

If you run your checking account close to the line, it's time to decide how to handle overdraft protection, or you could find yourself stammering at the cash register unable to pay.

Under a new Federal Reserve rule going into effect this summer, you have to "opt in" for the ability to overdraw your account with your debit card and pay the bank a fee for the privilege. In the last several years, banks made a mint off charging customers fees every time they overdrew their accounts with debit card purchases. Many customers, unfortunately, didn't realize they were overdrawing their accounts and racking up fees until they saw their bank statements. Some banks charged multiple fees a day, and at $39 a pop, they added up quickly.

Starting July 1 for new customers and Aug 15 for current customers, banks must get your permission for such overdraft programs. Your choices depend on where you bank.

Overdraft Protection Choices Vary

Bank of America announced earlier this year it would drop its overdraft fee program and let customers instead link checking accounts to savings accounts or credit lines to get overdraft protection -- a move praised by consumer groups.

ING Direct USA last week launched an online calculator that lets you compare average overdraft fees to its overdraft protection program, which lets Electric Orange checking customers link their accounts to credit lines. Overdrawing an account by $100 for 10 days would cost 20 cents, the banks says, versus the average $30 overdraft fee at other banks.

Other banks, meanwhile, are wooing their customers to opt in for debit card overdraft programs, saying they're offering the service as a convenience for customers.

Check the price of that convenience, though. Do you really want to pay $30 for a cup of coffee? Consider lower-cost overdraft protection alternatives, or better yet, watch the balance and avoid overdrafts all together.

Your responses to ‘Checking Account Overdraft Protection: Would You Pay $30 for a Latte?’

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Marc Kliner

9 June 2010 at 11:07 am

This calculator is pure genius. So easy to understand and use!

What a concept...pay interest on money you borrow. Kudos to ING Direct...as always, coming up with tools and fetures to help the American consumer.

Brilliant idea on the calc. Praises to the team.

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