Overdraft Fees- Opt In or Opt Out

Posted by Mrs Money on August 12th, 2010


There’s a new law going into effect on August 15, 2010.  It’s called Regulation E (Reg E), and deals specifically with overdrafts.  Basically now you have to choose to Opt In or Opt Out of overdraft protection.

Currently many banks will approve your debit card even though there is not enough money in your account.  Effective August 15, every banking client will be opted out of overdraft protection unless they choose to opt in. Should you opt in or opt out?

Opt In for Overdraft

If you choose to opt in for overdrafts, your card may get approved even though the funds are not available in your checking account.  This may be good in the event of an emergency where you are stuck with absolutely no cash and your car has broken down, or even to avoid embarrassment when you’re out to dinner with a date and your card would normally be declined.  On the other hand, opting in to overdraft protection would not be a good idea for someone who doesn’t balance their checkbook.  I definitely wouldn’t recommend opting in if you don’t keep up with your balance.  There’s no sense in risking overdraft fees!

Opt Out of Overdrafts

Opting out is just what it sounds like: no overdrawing your checking account with the debit card.  Don’t be overly confident, though: recurring debit card transactions are an exception. If you’ve let your car insurance company charge your debit card, the transaction may be approved even though the funds are not available.  Otherwise, if you don’t have the money in your account, your card won’t get approved to cover the transaction. This is definitely helpful in the fact that you’re less likely to get overdraft fees.

If you don’t do anything, you’ll automatically be opted out of overdraft protection.

Are you going to opt in or opt out of overdraft protection?  Why?

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18 Responses to “Overdraft Fees- Opt In or Opt Out”

  1. Jenny says:

    I’m glad the banks have to do this now. I’ve heard about some banks having a policy where if a few charges are about to hit, they will run the biggest ones first. The reason was apparently that they wanted to be sure important things like a mortgage were paid first, but the effect is that a person potentially has several more overdraft transactions than they would have–costing them, say, $150 in fees rather than $60. That’s not nice.

    I guess it comes down to how easily embarrassed a person is: Would you rather have people think you are broke, or actually BE even worse broke? We decided to just be careful!


    Mrs Money Reply:

    Jenny- I agree. I think banks do some pretty crazy stuff! The majority of banks I know post items in that order. It would make more sense if they did it in the order that they came in!


  2. sue says:

    We just opened up a new account at our new venue, and when sitting down with the bank VP (who opened our account for us), he explained the situation and quietly advised us to opt-out.

    His reasoning was this: we didn’t have a history of overdrawing our account (I think in the previous 5 years it happened once, when our mortgage company drafted the payment twice in a month), and if we opted out, there was no risk of incurring a fee PLUS an interest rate. Plus, he said, if we were running tight and ran in to an emergency, we could call him directly and he would approve any charge, even if we didn’t have the funding immediately available and all we would incur was a $30 overdraft fee, no interest.

    Knowing that our banker “has our back” is a good feeling – and so we opted-out, gladly. 🙂


    Mrs Money Reply:

    sue- That’s awesome! I love when bankers have the clients’ best interest in mind. I hope the bank works out well for you! 🙂

    How is Arizona? Does it feel like home? I can imagine how different it is from the Midwest!


    sue Reply:

    I completely agree – this bank has a small-town “ethical feel” to it, and it really makes me happy to have my money in a place like this. 🙂

    Arizona is beautiful and although it’s foreign to my eyes, it’s becoming a foreign that is less “strange” to my eyes as the weeks go on. We’re finding a church (yay!) and that helps with community (or feeling connected), but it’s far different than the Midwest – you’re so very right. I still miss the ‘green’ of Michigan, but the colours of dirt are pretty in their own right! LOL

    Thanks for asking, my friend! 🙂


    H Lee D Reply:

    Not sure where in AZ you are, but if you’re in the Phoenix area, I highly recommend the Desert Botanical Garden. It will give you a great(er) appreciation for all of the life in the desert.

    sue Reply:

    Thanks, Lee! I’ll check out the DBC – I’m pretty close to PHX proper. 🙂

  3. Mysti says:

    Thanks for reminding me to call my bank. I currently have overdraft protection, where if I do overdraft, it comes from my savings account. Need to check if that will still be the case.


    Mrs Money Reply:

    Mysti- It should still be the case, but I would definitely call the bank to check! I think it’s great to have that option set up just in case.


  4. Wait a minute. I’ve always had overdraft protection, on purpose. Just in case, even though I rarely go over on my checking. Now you’re saying in a few days that’s going to go away unless I call the bank and have them give me overdraft protection when it’s what I’ve always had and want!? That’s annoying!


    Mrs Money Reply:

    Mrs. A- The government is changing it 🙂

    That shouldn’t go away if you’ve got it set up that way. What is changing is that if you don’t have money in your checking AND savings (if set up for OD protection) to cover debit card items then your card would be declined. Currently it may be approved, even if you don’t have money in checking. Does that make sense?


  5. H Lee D says:

    We’ve opted out. We never use our debit card and only use our ATM card to withdraw the weekly cash, so overdrafting via card is not likely. Haven’t bounced a check in 8 years. We should be fine.


    Mrs Money Reply:

    H Lee D- I think I will too. I have overdraft protection set up and if we go over $1,000 we are in big trouble! 😉


  6. We opted out. I keep $1000 padding in both of our checking accounts, so overdrafting shouldn’t ever be an issue.



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