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Banks ending mandatory overdraft charges
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Until now, users of ATM or debit cards could make purchases that basically cleared their accounts, and then some, and the bank would cover the overage temporarily — for a fee.
Sometimes the overdraft was accidental, perhaps due to a mistake made in the checkbook. Other times it was a gas station that caused the problem: Use a debit card to buy gas at a pre-pay pump, and more often than not an amount much larger than the actual purchase would be put on “hold” for the balance of the day. Or maybe the consumer knew in advance that there wasn’t enough money for a purchase.
No matter the reason, if an overdraft was created, the bank charged fees that netted the banking industry many billions of dollars per year. If multiple transactions were made, multiple fees would be charged. It was the hefty overdraft fees — often amounting to $30 or more per occurrence — that consumers said were excessive, and the complaints stacked up at the Federal Reserve.
This type of overdraft protection shouldn’t be confused with a plan where a savings account covers shortages in a checking account. In those cases a bank will charge a fee to transfer funds from the savings to checking, but the fees are much smaller than when the bank fronts the money.
Starting next summer, banks will have to ask permission of consumers to charge overdraft fees. Account owners will have to opt in to have overdraft protection, and banks will be limited to charging one overdraft fee per month or six per year.
Unless consumers sign up for overdraft protection (and pay the resulting fees,) the end results could be harsh. Instead of a bank covering any overages (and charging a fee for it), ATM and debit cards will be shut off once the withdrawal exceeds the amount in the account — right in the middle of a transaction.
Here are suggestions:
• Balance your accounts every month and don’t spend what you don’t have.
• Sign up for the overdraft protection in case of an emergency expense. If you don’t have the money in the bank, that overdraft fee might be a welcome expense.
• Pay attention to leaflets that come with statements. Expect fees for other services to go up and minimum balances on accounts to go higher. Banks are going to miss those billions of dollars and will need to make them up in others ways.

Uffington does not personally answer reader questions, but will incorporate them into his column whenever possible. Write to him in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL 32853-6475, or send e-mail to
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