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Exclusive   2007 Courtesy Overdraft Study
  STATISTIC: The average courtesy overdraft fee is $29, Bankrate's  
  survey shows. But some banks increase fees for each offense.  
Traditional vs. courtesy

Traditional overdraft vs. courtesy overdraft

Courtesy overdraft plans or bounce protection are extended by banks so that customers aren't embarrassed at point of sale or have to deal with the hassle of a returned check. But most consumers don't know that this "loan" is being extended.

The best method for consumers to protect themselves against overdraft -- besides keeping track of their spending -- is to link their checking account to a savings account. That way, if you overdraw your checking account, you will be lending yourself money for a nominal fee.

Here are the facts about these types of overdraft protection plans.

Traditional vs. courtesy overdraft protection
Traditional overdraft
Courtesy overdraft or bounce protection
Written agreement. No written agreement.
Bank obligated to pay overdraft. No discretion. While bank may not pay if fraud is suspected, threshold is higher because of contract and liability for failure to pay. Bank retains discretion to pay or return any overdraft. Threshold for not paying due to fraud suspicions is lower.
Potential bank liability for failure to pay overdraft. No liability for failure to pay overdraft.
Overdraft may be repaid over time and in installments. Entire overdraft must be repaid in short period.
Consumer must meet creditworthiness standard to obtain product. Consumer need only meet eligibility standard for opening the account.
Interest charged for overdrafts. May be per item, application or annual fee. Flat per-item overdraft fee, unrelated to the amount of the overdraft.
Source: American Bankers Association
Create a news alert for "overdraft, debit card" -- Posted: Dec. 19, 2007
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Using credit card for overdraft protection
Courtesy overdraft not good for customers
2007 Courtesy Overdraft Survey results
Winners and losers: Certificates of deposit
Winner or loser: Mortgage shopper
Winner or loser: Home equity loans

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