Unauthorized Overdraft: Would You Like To “Opt-In” To Your Bank’s Overdraft Fees? Tell The Federal Reserve!
If you get attack of the overdraft, you might want to take a second and read this article. Email the federal reserve (the info is provided in the article) and let them know you’d like to opt into overdraft protection.
The crux of the argument is that most banks let you buy a 2 dollar dough nuts if you only have 1.99 in your account because they don’t want you to be embarrassed that your card was declined, and then charge you 28$, 34$, 42$ depending on the establishment, for the one penny that they lent you so your transaction can go through. This is one of the banks primary sources of income. I don’t know about you but I’d rather just get denied and not get the doughnut.
Given the low likelihood that people will unsubscribe, the default policy should place consumers in the arrangement that provides them with the greatest benefit, which is clearly not one that costs Americans more in fees than the amount of the loans themselves. In fact, with debit overdrafts, the cost averages twice the amount of the transaction, while the cost of being denied is zero. If consumers were warned they would be charged a $34 fee for buying a $2 donut, they might instead choose to hand the clerk a $5 bill – or skip the donut. The proposed rule would only be justified if consumers preferred to be enrolled in these overdraft programs and received real benefits from them. But evidence overwhelmingly shows that consumers don’t want overdraft loans and don’t benefit from them; thus, they should not be strapped with the burden of escaping this expensive trap.
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