Changes coming for bank overdraft fees

A magnifying glass over an overdraft statment and calculator
  • Habitual overdrafters make up only about 10 percent of the population.
  • In advance of the changes, banks are encouraging their customers to opt in.
  • Banks may return to old-fashioned customer service and relationships.

Banking customers may have already received notices alerting them to the fact that their bank account may be a little different this summer.

Beginning July 1 for new accounts and August 15 for existing accounts, banks will no longer automatically provide ATM and debit card overdraft protection. Instead, customers will have to opt in, or sign up specifically saying that they want the service.

Overdrafts triggered by checks and ACH transfers, for instance payments to bills, will still be automatically covered.

That means when making a debit card purchase or withdrawing money from the ATM, your transaction will be declined if it will put your bank account balance into the negative.

Most consumers will feel little impact

The move will be welcome news for anyone who's forgotten about a check and racked up five or 12 overdraft fees on debit card purchases. People like that are in the minority, however.

For most Americans, the new overdraft protection regulations will have little to no direct impact beyond affording them a bit more control over their overdraft options.

In fact, most of the population has never had an overdraft at all according to Bill Handel, vice president of research at Raddon Financial Group, a financial industry consulting firm in Lombard, Ill.

Consumers fall into three types of behavior

The firm has found that consumers fall into one of three categories of overdraft behavior.

"Some people are very good at managing their money, they never have any overdrafts ever. They make up about 70 (percent) to 75 percent of U.S. population," Handel says.

FDIC study on NSFs
Source: FDIC, Raddon Financial Group

Another chunk of the country, approximately 15 percent to 20 percent of the population, falls into the incidental overdrafters group. They tend to rack up, on average, about six overdraft incidents per year.

And then there are the habitual overdrafters who have seven or more overdraft incidents per year.


They only make up about 10 percent of the population, says Handel.

But, they pay the lion's share of bank overdraft fees, 68 percent of the fees, according to a 2008 study of bank overdraft programs by the FDIC.

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