How to Opt Out of Bank Overdraft Fees

Overdraft fees on your debit card can quickly compound an existing financial problem, and can do damage to an already overstretched military budget. But you can avoid those overdraft fees, even if you overdraw your bank account inadvertently.

BANKS OFFER OPT IN OR OPT OUT OF OVERDRAFT FEES

In 2010, Bank of America began testing a pilot program that would allow customers to avoid costly bank overdraft fees: the bank sends a text message when you overdraw your debit account. The text message gives customers a chance to "opt in" to a $35 overdraft fee and allow the payment to proceed. Your other option is to avoid that $35 fee by depositing money into a Bank of America ATM by 8 p.m. that same day.

FEDERAL RESERVE GIVES YOU A CHOICE IN OVERDRAFT FEES

According to a Federal Reserve ruling, banks and credit unions must get customer consent through an opt-in policy before charging an overdraft fee on your debit card.

Consumer groups have been critical of banks overdraft coverage policies. According to Rebecca Borne, senior policy counsel for the Center for Responsible Lending in Washington, D.C., banks profit when customers opt in and take the $35 Overdraft Fee.

The Federal Reserve rules do not limit how much banks can charge in overdraft fees, how many times a customer could be charged overdraft fees, and how debit card fees are collected.

The $35 debit account overdraft fee does not include overdrawn checks, just debit cards connected to your account

FEES CAUSE PROBLEMS FOR MILITARY SERVICE MEMBERS

Overdraft fees continue to be a hot issue -- especially for military service members living paycheck to paycheck, military students with loan payments, and military families with climbing debt.

Jean Ann Fox, the Consumer Federation of America's director of financial services, urges military consumers not to opt in, because fees can accumulate fast. Easy access to money you don't have makes the bank account similar quick-fix payday loans

AVOID THE OVERDRAFT OR OPT IN WITH AWARENESS

Take time to understand how often you are charged an overdraft fee.

For example, Bank of America may apply overdraft fees to four transactions per day at $35 each.

Bank of America charges a second $35 sustained overdraft fee if the overdraft and first fee are not repaid in a few days.

When those mounting overdraft fees are deducted from your next deposit, you might completely overestimate the amount left in your account - and that can cause even more overdrafts and fees.

Pay attention to how checks and other transactions are paid from your account. If a larger check or payment is processed first, you might bounce a couple of smaller checks and the fees can build up quickly.

And of course, pay attention to your checks and balances and avoid overdrawing your bank accounts. If you do, know your options for opting in or out of overdraft fees.