PHILADELPHIA (6/30/14)--In the four years that checking account holders have had to opt-in for debit-card overdraft protection, consumers still are confused about the process and associated fees. In fact, according to a recent survey by The Pew Charitable Trusts, more than half who paid an overdraft fee in 2013 don't remember agreeing to the service.
"Checking accounts are the most widely used financial product in the country, yet many consumers are still concerned and puzzled by bank overdraft practices," said Susan Weinstock, director of Pew's Consumer Banking Project (CNBC.com June 27).
Since 2010, financial institutions need to have the approval of account holders to process debit card transactions when the account has insufficient funds.
Faced with the choice of being declined or paying an average $35 fee, 68% of survey respondents preferred that a transaction be declined. Consumers paid an average of $69 in total fees for the last time their account was overdrawn--likely because once the account goes into the red, more fees are assessed as overdrafts domino through the account.
Eighty percent of those who overdrew their accounts were most concerned about the high cost of a penalty fee, the fee associated with "extended" overdrafts for failing to repay a negative balance on time and the process of transaction reordering, Pew noted.