Overdraft fees are a hot topic these days, and with good reason. There are changes underway, and you have choices to consider. We realize that not all of our customers have utilized overdraft services we provide, and some never will. Still, covering our customers when they occasionally overdraw their account is a service we have long provided, and will continue to offer.
You may have seen media coverage discussing changes to the way banks charge overdraft fees. Much of this coverage has focused on a new regulation that mandates how banks charge overdraft fees when retail banking customers use a debit card at point of sale (referred to as “everyday” debit card usage) or at an ATM.
The regulation is part of many financial reform measures taking effect now. The new rule says that a bank cannot charge an overdraft fee on an everyday debit card purchase, or an ATM transaction, unless the customer has elected or opted in to have their bank provide this service. This rule does not impact business accounts, only consumer accounts, and the rule only deals with everyday debit card purchases and ATM transactions. It does not concern recurring debit card transactions, for example, gym memberships, sponsorships, utility payments, etc.
The impact of this regulation has perhaps been a bit different for us at First American Bank than from other institutions, because we have not allowed our customers to overdraw their account by using a debit card at the point of sale, or at an ATM. This was our practice already, so our debit card customers will not notice a difference.
For example, if you swipe your debit card at a retail store, and you don’t have sufficient funds to make your purchase, we will not approve your transaction. The good news? You avoid an overdraft fee. The bad news? You are inconvenienced by not being able to complete your transaction. Or worse than inconvenienced, you could be in a very tight spot, and urgently need funds to make a purchase (think of buying gas…just when you need it most).
There have been rare instances where you may have used your debit card to make a purchase, and there were sufficient funds in your account, so the transaction was approved at the merchant point of sale. By the time the transaction was processed through the banking system, other items (checks, automatic withdrawals, etc.) may have simultaneously passed through the system and been applied against your account balance, resulting in an overdraft. The best way to prevent this situation is to carefully monitor and record all the transactions being performed on your account. This is more challenging than it used to be, with the variety of electronic ways to access your bank account.
While it has been our practice not to allow our customers to overdraft at the point of sale, or at an ATM, we realize that we have customers who may find that to be a desirable service. No one wants to experience the discomfort of a declined grocery purchase. Or, the inconvenience of a gasoline purchase denied at precisely the wrong time…
We will now begin offering you the option of paying everyday debit card purchases and ATM transactions even if you do not have sufficient funds at the time of the transaction. If you choose Extended Overdraft Protection Coveragesm, First American Bank will generally pay these types of items even if that places your account into a negative balance. There is no fee for choosing to have this service on your account. You only pay a fee if you use the service and overdraw your account at a point of sale or ATM.
If you are interested in having Extended Overdraft Protection Coveragesm added to your checking account, either click here and print the Opt In form and take it to your nearest First American Bank, or mail it to:
First American Bank
Extended Overdraft Protection Coveragesm
C/o Deposit Operations
P. O. Box 71155
Clive, IA 50325
Or, just ask for a form the next time you are in, and let us handle the rest.
Review the array of overdraft protection options that are available to you. Many options can save you overdraft fees altogether, although some of those require that you apply for credit products.
For example, a Home Equity Line of Credit (HELOC), or a Moneyline line of credit can be attached to your checking account to cover account shortfalls. While you have to qualify for either of these credit options, they can be very cost effective ways to handle the occasional overdraft.
Or, you could have another qualifying First American Bank account connected to your checking account, and have funds transfer in the event of a shortfall. This may be an effective way to guard against overdrafts, for a much lower cost than incurring an overdraft fee.
Think about what makes sense for you. Make an appointment with your personal banker to discuss your options. Be sure you have a plan in place to protect your accounts from the occasional overdraft.
See Frequently Asked Questions for more information about First American Bank overdraft protection options.