I'm a reasonably intelligent person. I have sat through the Overdraft Services spiel no less than 15 times, and I still don't completely understand it. Can the bank make it any more confusing?? There has to be a better way to explain what is covered and when. It can't just be me?

And, I do not believe that most of the bankers really know how it works. The bankers just read the words on the screen. I have had only one banker in all those visits who I believe really understood the overdraft system. She gave me a great overview and then went into the details. Other than that, I can't think of one of them who could really explain the differences in the program.

I've had a few who told me I had to have Debit Card Coverage in order to have Overdraft Protection cover debit card purchases. I know that's wrong and I just happen to read the brochure to them where it says it covers the debit card use without having Debit Card Coverage...like "Oooh look, but here it says..." Then they apologize and usually correct themselves. Drives me crazy that I know more about the crap than they do. It is a bit confusing, but not really...the bank's rig-a-ma-rol makes it more confusing than it really is.

Overdraft services are the biggest scam, right next to Pay Day loans. Always decline to ensure if your balances are insufficient, the transaction is denied.

@Danish wrote:

I'm a reasonably intelligent person. I have sat through the Overdraft Services spiel no less than 15 times, and I still don't completely understand it. Can the bank make it any more confusing?? There has to be a better way to explain what is covered and when. It can't just be me?

They make it confusing because the service is a multi-BILLION dollar chunk of their industry.



Edited 1 time(s). Last edit at 08/04/2017 07:58PM by Tarantado.

Overdraft is a short term loan that banks offer customers to keep their accounts at a positive
balance. Negative accounts cost banks money. There is nothing in the account for them to use.

Overdraft can be the bank paying the charge for you, for a fee; or money money pulled from a linked savings account or line of credit. Some banks charge a fee for that also. If you have a history of negative balances with a bank, you will be required to have overdraft protection.

Banks make a lot of money when customers use overdraft protection. As Tarantado said, overdraft is almost as bad as a payday loan. Actually, if you include the overdraft fee is more expensive. The interest rate is over 800%.



Edited 1 time(s). Last edit at 08/04/2017 10:14PM by HonnyBrown.

Fortunately, overdraft protection has changed since my kids started banking, ten or so years ago. At that time, opting out was not an option. Neither was electing to have the debit card refused at the point of sale if there were insufficient funds. Banks were raking it in hand over fist, with overdraft charges averaging $60 per. Banks lost a huge profit center when regulations changed.

I'm guessing, if you've heard the spiel umpteen times, it was on shops. Some bankers I shop waffle on this. I'm not always sure if it's lack of knowledge, or greed.

Overdraft protection is a good thing. If you spend more than your checking account has, your overdraft will protect it. You need to have a savings account. They will take what you owe and charge it to your savings account without fees! Some of you over stimulate! Hi Irene! Do they get it?

i have od on two different accts. & dont get charged to have it or to use it. never had to use it. if u use it at my banks, u dont get charged but counts towards savings withdrawal limit. i only use debit card for small required purchases for shops. use cc for almost everything to get points or cash back. keep track of charges & payments & incoming funds. not that difficult.

Edited 1 time(s). Last edit at 08/05/2017 12:41AM by MSNinja.

As the OP, I understand the general concept of overdraft protection. However, this particular bank distinguishes between "Standard Overdraft Practice," "Overdraft Protection" and "Debit Card Overdraft Coverage." I will give 100 Hero Citations to whomever can succinctly explain the difference between these in a cogent manner.

Standard overdraft protection is the usual, they cover the bad check and charge you $35. Overdraft protection is when you sign into their upgraded system, link a savings account to your account and they will take the money out for you and cover the check with your money. I forget if there is a fee for this but I"m sure there is and it's somewhere around $5. Debit card overdraft coverage works the same as overdraft protection except that you have the option to have the card declined at the point of sale with no penalty. (Forgive any errors, its been a couple of months since I've done these shops.) Also debit card coverage does not cover revolving charges such as health club memberships. I have about 350 of those folders somewhere but I'm just winging it.

Standard Overdraft is when banks, at their discretion, pay checks and other charges made with the account number (such as ACH, EFT, checks converted to EFT), pre-authorized and recurring debit card charges. They assess an OD fee (usually $35) if the item is paid, or they asses an NSF fee (also usually $35) if they reject/return the item. Either way, you pay a fee, its just called OD fee if they pay it, or NSF fee if they reject it. With Standard OD, one-time debit card charges and ATM transactions are denied when there are no funds available. If a one time debit card transaction overdraws the account, and there are no other transactions that day, then there will be no fee if they approve the charge. For example, if you have $20 and you tried to buy groceries for $25, then it will be denied; thus, no fee. But say you use the debit card to pay $19 at a restaurant and add a $2 tip. Since tips are usually not included when the restaurant runs the initial charge, the bank will approve it at the time of transaction since you have the funds. When it posts for $21, you are at -$1, but since it was an approved one-time debit card charge, there is no OD fee. Now say on the same day, your monthly gym membership fee also posts, you will get the OD fee for the gym membership since that is a recurring/pre-authorized charge, but you will not get a fee for the restaurant charge. Another example, day 1 your balance is $20 so you write a check for $15. Your payee took their time cashing it, so you forgot about the check. Day 5, you spent $6 for lunch using a debit card, but your payee then cashes the check on day 5 as well. So on day 6, you are now -$1, you get a fee for the check but not the debit card charge. They may pay the check coz it's not much, but they may reject it depending on the amount, but you will pay $35 either way. If your gym membership also posts on day 6, then you will get 2 fees, for the check and for the recurring charge. Have I lost anyone yet?
With the Debit Card Overdraft coverage, you have the right to opt-in and basically let the bank pay your one-time charge. So they will pay your groceries for $25 even if you only have $20, and they will charge you the $35 fee. If you then buy coffee for $3, you get another $35. Multiply that by the number of times you use the debit card (unless the bank caps the number of fees they charge per day). When opting in for debit card coverage, the standard OD still applies. So you get charged the standard OD/NSF fees, and the OD fees for your one time debit card charges. This was how banks used to charge OD fess, so many people where getting multiple $35 fees for small debit card charges. Regulation changes made it an opt-in coverage.
Overdraft Protection is when you use another acct (savings, credit card, line of credit, etc) to pull funds from to avoid overdraft. Banks may charge you a fee for this service. Each bank has their own policies, but this is pretty much the standard way the OD fees are assessed.
EDIT: Just want to note that the Standard Overdraft is, well, standard. That is, you cannot opt in nor tell the bank not to apply the standard OD. It is their discretion to pay/reject, and charge the OD/NSF fee. The debit card coverage is the only opt-in part. (Unless you have some kind of acct that does not have an OD/NSF fee at all).

Edited 1 time(s). Last edit at 08/05/2017 03:25AM by dcmea.

@shopper8 wrote:

Overdraft protection is a good thing. If you spend more than your checking account has, your overdraft will protect it. You need to have a savings account. They will take what you owe and charge it to your savings account without fees! Some of you over stimulate! Hi Irene! Do they get it?

I beg to disagree. My various banks charge a minimum of $35 for an overdraft fee. I have the crossover on the major checking account but I'm still charged $35 for the privilege It's a churning fee that banks tell people so they think they feel safe.

It's best to have the card turn you down if there is insufficient funds. Granted that could be a bad day on the road, but hopefully you have a credit card that you clean up every month for those unforeseen emergencies.

I do plenty of bank shops and it is a topic that is glossed over because some don't get it and those that do it, know it is a huge rip off.


I know, another novel.



Edited 1 time(s). Last edit at 08/05/2017 04:42AM by MA Smith.

They have to go through a spiel due to Dodd Franks. Same with the slaughter of trees when opening accounts. Basically, Overdraft Protection allows money to come from savings/credit card/line of credit to cover insufficient funds in the checking account. Debit card coverage when answered yes, gives the bank discretion to pay a debit card charge when all funds in the checking account and any accounts connected to cover overdrafts are exhausted. If the bank pays the debit card charge, you are usually charged an overdraft fee.

It depends upon the financial institution. Smaller ones usually derive a large chunk from fees. Larger ones do not. Which is why one blue bank has decreased fees for Overdraft protection. NSF charges are large, but there are so many ways to avoid them.

There are three different kinds of overdraft protection - and each is governed by the amount and type of fees/interest that can be charged:

1. Overdraft protection from savings. Your savings account is "linked" to your checking. If you overdraft on your checking, money is transferred from your savings (if you have money there) and covers it. Note that due to Reg D, this can only happen 6 times per month - after that the overdraft fails OR a different overdraft protection goes in place. This is reset at the beginning of the month. Depending on your bank/credit union this transfer may be "free" (it is at my credit union) or cost a small amount (in my area it never costs more than $5 per transfer).

2. PLOC - Personal line of credit - this is an unsecured line of credit, somewhat similar to a credit card - and it kicks in if you overdraft. It has an interest rate, which is subjected to usury limits (e.g. cannot be higher than 28%, even lower if you are military or family of military) but can also have a nominal fee each time it is activated. This is a loan. Rate can be based on your credit and is reportable to credit agencies. PLOCs may be substituted with an actual credit card that is set up the same way (but banks are moving away from this).

3. Overdraft protection... this is the sneaky wicket. This is not considered a loan and each time it is used, there is a fee of $25 to $40 per use. You use your debit card to pay for a latte at Starbucks, you thought you had the money but you don't - it pays it BUT adds a $40 fee on top of it. This is not a loan, there is no interest rate, and the money (and fee) is taken back as soon as the account becomes negative. It has to be negative in say 15 days or they start making moves to close your checking account. it is per overdraft transaction in a day and not per amount, so you can get hit with multiple small overdrafts that amount to big money (e.g. four overdrafts could be over $150 in fees for four small transactions). They get around usury laws because it is an convenience fee.

In 2005 - the feds required the banks to disclose these overdraft fees and required customers to opt in to even having the possibility of overdraft fees hit on their account. If you don't have overdraft protection and you try and overdraft you get rejected (which is fine, unless it is a check - where you get an NSF fee).

personally - I have overdraft set up from savings and that is it.

Great explanation. So sad, too bad the sales reps don't have the understanding you freely gave us in clar and understandable language.

It used to be going to the bank was straight forward. Nowadays, I almost miss shopping for a new car. No matter what you do; they do their best to keep you in the box, make you feel special after dressing you down and always make sure they never have the required materials. Lets talk about when the sales guy has to do a bathroom break, do you mind, mam?\

Get over themselves!

Once again, great explanation. Thank you for your clear and concise explanation.

Wrote another novel, guess how much I care?