Beware the bank offer of free “overdraft coverage” (which means let us keep charging you overdraft fees on debit card/ATM transactions despite new laws)

Sometimes doing NOTHING is the best thing … especially when banks are trying to talk you into OPTING OUT of protection provided by new consumer protection laws that put limitations on when they can charge NSF (insufficient funds)/Overdraft fees.  If you don’t opt for their “coverage” (in other words, OPT OUT of your new rights under the new law), they can almost never charge you an NSF/Overdraft fee for a withdrawal you made from an ATM or a purchase you made with your Debit Card.

5th 3rd video features the scare tactic: "You Could Be DECLINED" to get you to OPT IN to keep getting charged NSF fees

But it won't cost you anything! After Aug. 15, only checks bounce and get fees, NOT plastic! (for ATM or everyday debit transactions) ... unless you let the bank talk you into OPTING IN to their "Overdraft Service" or "OD Coverage" that lets them ignore the new consumer protection laws.

Over the past couple of months, most banks have tried hard to convince checking account customers that they are better off with the current “NSF” (insufficient funds) rules and fees — by opting in to what they market as free “overdraft coverage” — rather than doing nothing and becoming protected by new rules that go into effect August 11, 2010.

If you’ve ever spent a weekend using a bank debit card making ATM withdrawals and swiping it to pay for multiple small purchases — $5 to $10 for lunches/dinner/etc. — but forgotten about some item that came through Sunday or Monday automatically (say an auto-posted charge for fitness center or whatever) that put you slightly in the red, you know how those handful of mistakes and a $50 negative balance can quickly cost you $300 or more in NSF fees.

The red box isn't necessarily the BAD one!

Doesn't RED mean STOP (and don't do that) and instead follow the GREEN to GO do that instead? 😉 Don't fall for it! If you do NOTHING, you're covered Aug. 15, 2010 and onward by new law that stops banks from charging you NSF/Overdraft fees on any ATM or debit card transaction.* This is on 5th/3rd Bank's website. They even have a video to try to pitch it to you and a very slanted FAQ. And they have a chart that compares "Overdraft Coverage" (just giving up the new protection and maintaining status quo) to their "Overdraft Protection."

Regardless how small those debit card purchases — $1 or $2 or whatever — they each cost you about $30 to $50 in overdraft (NSF) fees.  And many banks will add on another $5 to $15 per day that you have a negative balance after the first day or two.  The way banks change the order of your transactions — in the pending/posting process — from highest first to lowest (rather than first received to last received) — is designed to let them charge the highest possible number of NSF fees when you have one LAST transaction mess things up.  By doing that, those 10 small transactions of $1 to $10 can each be assessed an NSF fee … even though it was a single $50 charge that went through on Monday after your weekend of purchases that caused the problem.  Wells Fargo Bank was recently ordered by a federal court to pay their customers back $200 million in NSF fees because of this reordering practice.  It’s under appeal.

The new law (unless you let the banks trick you into OPTING OUT by choosing to ELECT to stay covered by what they call the gift of free “Overdraft Coverage”) makes it so:

  • They can NOT charge you an overdraft fee for an ATM transaction that put you in the red.  They should know at the time they let you put it through whether you had the cash then or not.
  • They can NOT charge you an overdraft fee for everyday Debit Card transactions that put you in the red (as long as an authorization code was received by the store/restaurant where you used it to make a purchase).  Again, they know your balance and whatever other pending transactions are being held against your account. (The only exception is where you gave a company your debit card for a recurring monthly/annual subscription or membership because those transactions do not usually ask for a subsequent approval after the first one.)

I have accounts at several banks — Huntington, CHASE, 5th/3rd, Key Bank, and PNC.  And it has been amazing to watch how each has tried to market this and convince customers they should act soon to “protect” themselves from consumer protections that start Aug. 11. 😉

CHASE still has a huge splash ad on their http://chase.com login page that features this “Impending doom on Aug. 15” warning at the top:

CHASE banks "The sky is falling on Aug. 15" if you don't OPT IN to let them keep charging you NSF fees for ATM/debit transactions

As you can see from this big splash on the top of the page where CHASE customers go to log in to do web banking, CHASE is putting the hard sell on signing up for what they call "Overdraft Coverage" ... if you OPT IN for that, you give up the rights you'd get automatically starting Aug. 15 to not be charged NSF fees for ATM/debit transactions.

And there’s an ever-present reminder of some “protection” (implied by the shield in the logo) above and below your list of accounts with a lure to UPDATE your settings:

After you log in at CHASE, they have this lure to update your coverage

Every time you log in to your CHASE bank website, you're hit with this pitch to update your "Overdraft Coverage" -- they so want to keep approving you for that $5 cup of coffee so they can charge you about $40 ... and another $40 for the second cup later that day ... and so on ...

And another link inside CHASE to drag you to OPT IN to letting them keep charging NSF fees

And another link to lure you to ponder the "benefits" under your account balances on the same page!

The funny thing is that there was an advertisement by CHASE early in the year bragging about how they would NO LONGER charge overdraft fees for ATM or debit card transactions — as a selling point to get people to open accounts with them … as if it was something brand new that other banks didn’t offer. 😉

But their tune changed when they needed to market their existing customers and convince them to OPT IN to something that would let them continue charging these fees.

I thought CHASE had been the most aggressive about it until 5th/3rd started turning up the heat and even making movies about it and flowcharts that use deceptive color coding for the effect of your choice.   Do nothing and … RED box (your card gets declined! … oh, and you pay no ridiculous fees for overdraft … maybe $300 for a handful of small charges — after all, they put all the smallest transactions through LAST so they have best chance of getting multiple fees or several instead of just one — the ONE that put you in red).

Huntington's pitch for Debit Coverage

Huntington seemed a bit more honest with their pitch. But it's always confusing when you ask somebody to "Opt in" to something that's being presented as the "good option" (in this case, their "debit overdraft service") which equals "Opt out" of new laws protecting you from these fees on ATM and debit card transactions. See below.Several mailings have been sent to me too

Huntington didn’t put a hard sell on it. Here’s their info page on it.

PNC’s was pretty mild.

Key Bank was sort of in between on it.

Most sent mailings to my house too.

At left is how Huntington pitched their “Debit Overdraft Service” and below you will see the entire page where you decide to “Opt in” or “Opt out” … just be careful you know what you’re opting OUT of when you “OPT IN” for their “service” (giving up your new protections before they start Aug. 15 and letting the bank charge you fees as you accidentally take out more with the ATM and everyday debit card transactions than you have available … instead of simply declining you … and letting you avoid a fee).

The Huntington National Bank's OPT IN or OPT OUT screen

Do you OPT IN or OPT OUT ??? And what is it you're OPTING INTO? --> "Yes, please opt me in to continue being charged $150 or more when I use my debit card to pay for 4 cups of coffee right before something puts me $1 in the red (or perhaps don't allow that last thing to happen at all ... the 5th cup of coffee being declined instead of incurring any fee).

Here are some more examples:

  • PNC video pitch and Q&A and a screenshot of the more discrete ad on the homepage of PNC and another of the page to which it links (while video is playing … and mentioning the “D” word — “DECLINED” — in hopes that scares you enough to say, “OK, go ahead and keep charging me $150 or so when I mess up and swipe my card at Starbucks for a 5th cup of coffee that weekend when I should have stopped at 4 … and then another transaction caused 4 cups to be in the red.  That’s much better than just being declined when I go to get coffee.  Oh, and if I try to take $100 out of the ATM when I have $99, YES, by all means, please give me the $100 instead of letting me know to take $1 less.  And go ahead and charge me about $40 as a fee for taking $1 too much.  That sounds like the kind of protection/service I need.” 😉
Much more subtle ad on PNC front page

Much more subtle ad on PNC front page about changes in overdraft rules

PNC video with the scary "You could be declined" message -- their central theme in trying to scare you into clicking on OPT IN to keep getting charged NSF fees
At least the guy in the PNC video says there’s no right or wrong decision.
If you decide you want to NOT get charged NSF/Overdraft fees after Aug. 15 for ATM and most debit card transactions, all you have to do is:  NOTHING!
If you want to “OPT IN” to OPT OUT of being protected by the new laws, be careful as you read the language on the screens … you may accidentally say “YES” to getting charged fees rather than avoiding them (again, if you want to be protected by the law, all you do is NOTHING … you don’t have to OPT OUT of what they’re pitching as “coverage” or a “service” to stiff you for $30 to $40 when you go into the red by $5 or $10 with a single ATM or debit card transaction; also, keep in mind that even if you choose this “coverage/service,” there’s no guarantee they won’t decline you anyway … they might just let you run 2 or 3 through first to make sure they can make $120 off you before they cut you off — probably while you’re out on that dinner date with someone you’re trying to impress ;-):
CHASE opt-in page (part 1)CHASE opt-in page (part 2)
Huntington's opt-in page
Related resources:

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