Many people may not see how the financial reform law has helped them save millions of dollars because much of what actually affect all of us has not been covered by reporters or even exposed until now. Many of Americans were probably not even aware of the millions of dollars banks take in every year because we were lead to believe that this was more of a benefit for us instead of a bonanza for the banks. This program is familiar to every single person who has a checking account, its called overdraft coverage.
Banks tell us that they are doing us a big favor by covering the overdrafts made with ATM/Debit Card transaction by allowing them to go through even though there may not be enough money in our accounts to do so. Americans are happy about this because they are allowed to overspend. Banks are happy about this because they make millions off of the amount customers overspend. I guess its okay if you do not mind paying those fees to deposit, withdraw or the other thousands of maintenance fees banks already charge. Their bonanza is now being threatened and they must now disclose but instead of just telling you the truth about what has been happening. They have decided to spin it to make many feel that they are the victim.
Many banks offer you a service by extending a standard overdraft coverage where they authorize and pay overdrafts on checks and other transactions or automatic bill payments. They do not extend this standard overdraft coverage on ATM transactions and debit card transactions. It must be made clear, however that the payment of these overdrafts is solely at the discretion of the bank. Overdraft Coverage should not be confused with Overdraft Protection. Both carry a fee but coverage is a little more expensive than protection. The major difference between Overdraft Coverage and Overdraft Protection is that protection links you’re to your savings, credit card or line of credit to cover overdrafts. The overdraft coverage is what all customers of that financial institution are subjected to which cost more than overdraft protection and is the fee you pay whether you asked for it or not.
Let’s do the math. Some financial institutions charge $8.00 per day for any overdraft that is not re-paid within three (3) working days. This per item fee is charged based on your overdraft history over a twelve (12) month period previously. The law prevents them from charging more than ten (10) items per day and keeps them from charging any overdraft of five dollars ($5.00) or less. The spin is the bank attempting to save you the embarrassment of having your purchase declined at the checkout counter. A really good argument, if you think about it but what has occurred with the new law is now you will have the option of choosing to give the bank extra money instead of them taking it without your permission.