Consumers need to become smart
Columbus, Ohio (Vocus) July 9, 2010
New government banking regulations regarding debit and ATM cards will take affect on August 15, 2010. They will impact over 500 million debit cards in circulation in the U.S., according to a February, 2010 Nilson Report. Consumer complaints about spiraling bank overdraft fees helped spur the change in regulations. Up to now, banks have generally covered insufficient funds automatically and charged hefty overdraft fees of up to $39. At some point if the insufficient funds activity continued, the bank would decline account transactions and close the account, but not before some real financial damage was done.
The important consumer action step - Under the new rules, consumers need to let the bank know if they want the bank to cover ATM withdrawals or debit card purchases that would cause an overdraft. If they do not “opt-in” for overdraft coverage, the bank will decline the purchase or deny the ATM withdrawal. This may save the consumer being charged costly fees, but may instead cause embarrassment at the checkout-line. Consumers should be on the lookout for written disclosures sent to them, but should start now to consider which way they want the bank to handle overdrafts so they can respond quickly.
Some banks do offer a line-of-credit or allow you to link a savings account to your checking account to cover overdrafts. Although there may be a cost for these services, it can be less expensive than current overdraft practices. It is important to note, that these debit card rules do “not” cover automatic payments that consumers may have set up for paying bills such as a mortgage, rent, or utilities.
Getting at the real problem -There is a far more serious underlying problem that these new rules bring to light: too many consumers, even those with sufficient income, are poor managers of their checking accounts. And this problem is costly. Just “one” overdraft per month can add up to $468 a year in fees ($39 x 12). That can be a big chunk out of a family budget…money that certainly could be put to better use. “Consumers need to become smart “money managers” and stay on top of checking account transactions,” says Michael S. Kappas, President and CEO, Apprisen. “Take control of the situation. Keeping your account balanced, using either the monthly statement or on-line access, can help eliminate overdraft problems.”
Tips for avoiding overdraft fees or the embarrassment of having a purchase declined
1. Remember your true account balance is in your check register, not on your ATM slip.
2. Keep track of all deposits, withdrawal slips and purchase receipts. Record them in your check register.
3. Know your checking account balance before you make a debit card purchase or ATM withdrawal.
4. Balance your account at least once a month.
5. Put “ghost” funds in your checking account. Deposit a few hundred dollars and don’t record it in your register. Don’t forget to account for the ghost funds when you balance your account.
6. Talk to your bank representative about your options for avoiding all potential overdraft situations.
Apprisen Financial Advocates, a national nonprofit credit counseling agency, has been helping consumers manage their finances and get out of debt since 1955. Certified counselors provide money management, debt counseling, HUD-approved housing counseling and financial education. Services are provided in-person in 10 states through local offices and nationally by phone or via the Internet. The oldest nonprofit credit counseling agency in the country, Apprisen Financial Advocates is known in its local communities as Consumer Credit Counseling Service (CCCS). Accredited by the Council on Accreditation (COA), Apprisen is a member of the National Foundation for Credit Counseling (NFCC), the Better Business Bureau (BBB), and AICCCA. For more information call 800.355.2227 or visit http://www.apprisen.com .