What you need to know about
New Overdraft Rules for Debit and ATM Cards
Important Information from the Federal Reserve Board
New Federal Reserve rules give debit and ATM card users additional options regarding overdrafts. In the coming months, credit unions and other financial institutions must offer you the ability to make decisions about overdraft services for transactions made with your debit or ATM cards,
Here are some key things you need to consider when reading the notice:
THE BASIC FACTS
Types of overdraft services: An overdraft occurs when you make a purchase or ATM transaction but do not have enough money in your account to pay for it. For a fee, your credit unionís overdraft services will cover you when you become overdrawn. This fee can apply to each time you overdraw your account.
Generally, there are two types of overdraft services:
Standard overdraft services: Your credit union will cover your transaction for a flat fee of about $25-$30 each time you overdraw your account, For example, if you make a purchase with your debit card for $150 but only have $100 in your account, your account will be overdrawn be $50 and your credit union will charge you a fee. If you then make an ATM withdrawal for $50, your account will be overdrawn by $100 and you will be charged another fee. In this example, if the fee your credit union charges for overdraft services is $30, you will pay a total of $60 in fees.
Overdraft protection plans: Your credit union may offer a line of credit or a link to your savings account to cover transactions when you overdraw your account. Credit unions typically charge a fee each time you overdraw your account, but overdraft protection plans may be less expensive than standard overdraft services.
THE NEW RULES
You choose: In the past, some credit unions automatically enrolled you in their standard overdraft services for all types of transactions when you opened an account. Under the new rules, your credit union must first get your permission to apply these services to everyday debit card and ATM transactions before you can be charged overdraft fees. To grant this permission, you will need to respond to the notice and opt in (agree).
Existing account: If you do not opt in (agree), beginning August 15, 2010, your credit unionís standard overdraft services wonít apply to your everyday debit card and ATM transactions. These transactions typically will be declined when you donít have enough money in your account, but you will not be charged overdraft fees.
New Accounts: If you open a new account on or after July 1, 2010, your credit union cannot charge you overdraft fees for everyday debit and ATM transactions unless you opt in. If you open a new account before July 1, 2010, your credit union will treat you as an existing account holder: you will receive a notice about your credit unionís overdraft services and will have to decide if you want them for everyday debit card and ATM transactions.
Flexibility: Whatever your decision, the new overdraft rules give you flexibility. If you opt in, you can cancel at any time. If you do not opt in, you can do so later.
Checks and automatic bill payments: The new rules do not cover checks or automatic bill payments that you may have set up for paying bills such as your mortgage, rent, or utilities. Your credit union may still automatically enroll you in their standard overdraft services for these types of transactions. If you do not want your credit unionís standard overdraft sevices in these instances, talk to your credit union; you may or may not have the option to cancel,
everyday debit card transactions- purchases made with your debit card on a day-to-day basis (excludes all checks and automatic bill payments)
overdraft- an overdraft occurs when you write a check, make an ATM transaction, use your debit card to make a purchase, or make an automatic bill payment or other electronic payment or other electronic payment for an account greater than the balance in your checking account.
opt in Ė giving your credit union permission to include you in a particular service
opt out Ė declining a particular service offered by your credit union.
This brochure was written by the Federal Reserve Board. For additional information, go to www.federalreserve.gov
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