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?