- advertisement -
 

5 overdraft programs facing review

The FDIC is proposing a study of the following five overdraft protection programs offered by financial institutions and the extent to which customers are using them. If you have or are considering overdraft protection, you should make sure you know what you have and what the provisions of that protection mean to you.

5 overdraft programs facing review:

1. Linked transfer accounts
These are contractual agreements between a bank and a customer, linking the customer's transactions account with other accounts within the bank, including savings and credit card accounts. In the event of an overdraft, the bank will fulfill the customer's obligations by transferring funds from the customer's other accounts linked to his transactions account.

- advertisement -

2. Overdraft lines of credit
Overdraft lines of credit are contractual agreements between a bank and a customer that the bank is willing to lend up to a specified amount over a specified future period to cover overdrafted items. These programs DO NOT include line of credit programs that do not specifically cover overdrafted items, for example, home equity lines of credit. The bank extends the line of credit after reviewing a customer using standard underwriting criteria; the line is considered a loan and requires standard Truth-in-Lending (Regulation Z) disclosures.

3. Automated promoted overdraft programs
A program or policy where a bank generally honors a customer's overdrafted obligations is an automated promoted overdraft program; however, customers are informed of the existence of the overdraft protection program. The program is uniformly offered to qualifying customers. Excluded are all overdraft programs where APR is required. The program is automated in the sense that standardized procedures or a "matrix" is used to determine whether the NSF item qualifies for the overdraft protection. Automated programs are typically, but not necessarily, computerized.

4. Automated, nonpromoted overdraft protection
These are programs or policies where a bank generally honors a customer's overdrafted obligations; however, customers are NOT informed of the existence of the overdraft protection program. The program is automated in the sense that standardized procedures or a "matrix" is used to determine whether the NSF item qualifies for the overdraft protection. Automated programs are typically, but not necessarily, computerized.

5. Nonautomated nonpromoted ad hoc overdraft protection
These include truly incidental and discretionary accommodations to customers by banks to honor overdrafted items. These decisions are made independent of or override the programs described in (1) through (4).

Source: FDIC

Bankrate.com's corrections policy
-- Posted: Dec. 17, 2006
 
 
Create a news alert for "savings"
 
 RESOURCES
Using a credit card for overdraft protection
7 ways to keep your account in check
Bankrate's Fall 2006 checking survey
 TOP SAVING STORIES
Winners and losers: Certificates of deposit
Winner or loser: Mortgage shopper
Winner or loser: Home equity loans
 



Checking and Savings
Compare today's rates
NATIONAL OVERNIGHT AVERAGES
Interest checking 0.39%
MMA 0.36%
$10K MMA 0.33%
RELATED CALCULATORS
  How long will your savings last  
  How to reach a savings goal -- with scheduled payments  
  Watch your savings grow with regular deposits  
VIEW ALL  
FINANCIAL LITERACY
Rev up your portfolio
with these tips and tricks.
- advertisement -