Yes, we’ve written about why you should just say “no” to overdraft “protection before.
But we’ve got to revisit this topic one more time for two very good reasons:
Reason 1. The deadline for banks and credit unions to get you to enroll in overdraft protection is Sunday (Aug. 15).
Reason 2. A new report says some banks and credit unions are aiming their marketing campaigns at customers who have paid these outrageous fees in the past – and are most likely to pay them in the future.
That study from the Center for Responsible Lending blames banking industry consultants for the widespread use of that strategy.
“…20 to 29% of your members give you 90% of your NSF [non-sufficient funds] income,” it quotes from one consultant report. “Target those top 29% and get them to opt in…”
“If they are in the top 29% of abusers, call them” said another.
As a result, the study says the University of Iowa Community Credit Union is actually “offering incentive-based pay to employees who can identify accountholders who have overdrawn their accounts when they walk into a branch and then convince them to opt in to debit card overdraft coverage.”
And credit unions are usually the good guys when it comes to treating customers right.
In the past, banks and credit unions could automatically sign customers up for “overdraft protection” on their checking account unless they asked to opt out.
It was a nasty practice that allowed them to ding you with a $34 overdraft fee if you didn’t have the funds to cover that $2 cup of coffee you bought with your debit card. Those fees were a major source of income for the banks, drawing in nearly $24 billion annually.
New financial regulation bans the practice of automatically enrolling customers for overdraft protection. Banks were given until Sunday to get existing customers to opt in or they must be dropped from overdraft protection programs — and their fees.
A few big players, including Bank of America and Citibank, didn’t bother and have said they will decline debit card transactions that would have otherwise triggered an overdraft fee.
But as the Center for Responsible Lending found, some banks and credit unions are doing everything they can to continue exploiting their “frequent fliers,” as customers who regularly incur overdraft fees are called by the consultants.
Our advice remains the same: Do not agree to overdraft protection, no matter how many times it’s pitched to you.