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New overdraft rules to take effect on July 1, 2010

By Sally Maison
Published: Wednesday, April 14th, 2010

CULTRF-00016099-001Consumer groups are now on a great effort to look after banks that are too desperate to convince debit card users to give in or opt into the overdraft fees. This kind of option is believed that it could be used as a way to deceive cardholders.

The Federal Reserve Board came up with a proposal to a new rule that would ban credit unions and banks that would charge overdraft fees to clients who make withdrawals through ATMs or make a one-time debit transaction that could have their accounts be overdrawn.

Banks are only allowed to have an overdraft fee charge provided the customer agrees of the overdraft services offered. Card owners who do not opt for the fee and services can still make the purchase and make withdrawals that are declined on checkouts or ATMs when there is no enough balance left on their account to complete the transaction they needed.

If approved, the new overdraft rule will take effect on July 1, 2010 and this would cover millions of U.S debit card owners as well as those individuals who would be applying for a new debit card in the future. With the approval, it overdraft fees on existing accounts will be banned after August 15, 2010 unless the customer opts for it.

In line with this, some banks like the J.P.Morgan Chase has started making some policy changes and sending notices to their clients urging them to opt for overdraft fees. The notice reads as follow, “Your debit card may not work the same way anymore even if you just made a deposit. If you don’t contact us, your everyday debit card transactions that overdraw your account will not be authorized after August 15, 2010 — even in an emergency”

Consumer groups interpret Chase’s notice as a tactic to ‘scare’ the customers in signing for an overdraft.  Chase is not the only back that is making some changes in their  overdraft fee policy.  Even the Bank of America has announced March this year that it will be launching its new policy which authorizes a point-of-sale debit card transaction only if there is not enough balance in the account at the time a purchase is made.

Overdraft fees range from $15 to $39 regardless of overdrawn account. Whatever angle you look at it, the banks would always be in advantage. The said figures obviously drew criticisms for its unfair impact to the not too privileged, minorities and elderly.

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