New debit card rules for overdrafts now in effect

From now on your bank will reject your debit card when you try to withdraw more money than you have in your account, unless you tell them otherwise.  Up until now, banks have simply honored the overdraft amount and then charged you for the service — often $30 or more — no matter how small the overdraft.

This system led to some startling charges.  Let’s say you used your debit card to get gas and the amount was $2 more than what was in your account.  That could trigger a $30 charge.  Then, you went into a store and used the debit card for a $20 purchase.  You could get slapped with another $30 charge.   And so on.

This can no longer happen automatically.  You would have to give your bank permission to pay the overdraft and make a charge.  I suggest that if you want to cover your overdrafts you see what your bank will do other than simply pay the overdraft and charge you.  Will they take overdrafts out of a linked savings account, for example?   Or set up some sort of revolving loan account?

Remember that the new rules are for debit cards only.  Your bank may still automatically enroll you in their standard overdraft practices for checks or automatic bill payments that you may have set up for paying bills such as your mortgage, rent, or utilities.   If you do not want this to happen, you have to talk to your bank to see what other options they might offer.

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