Overdraft Protection: Good or Bad? pt2

Much controversy surrounds the issue of overdraft loan products. As you may know, even if you do not have a linked account for overdraft protection, banks will still allow you to overdraw your account when you make check payments, withdraw money from an automated teller machine, or use a debit card. Then, they routinely charge overdraft fees. Legislation was recently proposed in an attempt to end this practice. However, representatives from five major consumer advocacy groups are disappointed with the outcome issued by the Office of Thrift Supervision, the Federal Reserve Board, and the National Credit Union Administration concerning bank overdraft loan products. The new proposal will require banks that allow overdrafts to provide a right to opt out of these programs, but the new proposal does not require banks to obtain permission to "opt-in" the overdraft programs before enrolling account holders in the systems.

According to a recent Center for Responsible Lending (CRL) survey, consumers want, but are not getting the choice of whether or not their checking account will include a fee-based overdraft loan feature. Interestingly enough, respondents to the survey reported that they would overwhelmingly prefer that their debit transaction be denied at the checkout counter if approving it would cost them a $34 fee. The CRL survey also found that 16% of respondents pay 71% of overdraft fees.

Keep in mind that overdraft protection is intended to help you out in case you accidentally overdraw your checking account once in awhile. According to Bankrate.com, banking experts estimate that approximately 50% of consumers that have overdraft protection use it every month. If you find yourself using this service this frequently, you may consider keeping better track of your expenses. Our tips on how to balance your checkbook listed below may help you bounce less checks and use overdraft protection as little as possible. After all better debt management is the key to living better debt free.