Q: Are banks obliged to reject attempts to use a debit card when there are insufficient funds in the account?
A: When you use your debit card to make a purchase or other electronic payment for an amount greater than the balance in your checking account (thus creating an overdraft), the bank can choose to make the payment, or not. In 2010, the Federal Reserve issued new rules regarding fees banks charge for overdrafting debit card and ATM transactions. Under the old rules, banks were permitted to automatically enroll their customers in their standard overdraft practices. These overdraft practices typically involved charging customers a fee to provide the additional funds. However, under the new rules, the bank must obtain the customer’s permission to apply its overdraft practices to the account before charging a fee, which the customer typically provides by agreeing to a notice sent by the bank.
If you don’t opt in to overdraft procedures and you attempt to make a purchase or withdrawal, which would overdraft your account, the transaction will typically be declined, but you won’t be charged an overdraft fee. However, if you’ve opted in to overdraft protection, your account can be overdrafted, and the bank can then charge you the fees set under the terms in your opt-in agreement. Be aware that these fees can mount up quickly, so make sure you know what you’re agreeing to.
In sum, to avoid overdraft charges, remember:
(1) Do not sign an agreement with the bank authorizing overdraft charges.
(2) Keep track of the money in your account by keeping your check register up to date.
(3) Make sure to record your electronic transactions as well.
(4) Make sure to take into account automatic bill payments.
(5) Review your account statements each month.
(6) If you do overdraft your account, deposit money into the account to cover the overdraft and any fees in order to avoid any additional charges.
(7) You can link your account to a savings account. You may be charged a transfer fee when overdrafting your checking.
(8) You can link your account to a credit card you have with the bank. You may be charged a cash advance fee when overdrafting your checking.
If you have a complaint about the fees charged by your bank, you can try to resolve the problem directly with your bank. If your complaint involves a Georgia state-chartered bank or credit union, you can file a complaint with the Georgia Department of Banking and Finance (http://dbf.georgia.gov/complaints-and-inquiries); otherwise, you can contact the Consumer Financial Protection Bureau to file your complaint (http://www.consumerfinance.gov/complaint).
Do you have a consumer question? Go to ConsumerEd.com to submit your question and read additional consumer tips. Always consult a lawyer about legal issues.