How New Banking Rules May Impact Your Second Chance Bank Account
Due to deceptive and unfair practices within the credit card industry federal regulators were prompted to implement new rules to protect consumers. Most of the rule changes affect credit cards, but one important rule may impact your pre-paid debit card account (these accounts are frequently used as second chance bank accounts). Here’s what you need to know.
The credit card reform rules passed by federal regulators on December 18, 2008 ban lots of deceptive (and expensive) practices that credit card companies have used lately to make more money from customers (such as raising the interest rate on an existing credit card balance when the consumer is paying the credit card bill on time).
One of the rules also affects debit card accounts (including certain prepaid debit card accounts and regular debit cards linked to bank accounts). The rule:
- Requires that banks provide consumers the right to opt out of, or alternatively opt in to, the payment of overdrafts for ATM withdrawals and one-time debit card transactions; and
- Prohibits banks from assessing overdraft fees caused by certain debit holds.
So how does that help you?
Have you ever used your debt card at store, and then found out that you overdrew your account? If you have overdraft protection, the bank would let you make the purchase, and then hit you with an expensive overdraft advance fee. This can add up.
The new rules will allow you to “opt out” of this practice. If you “opt out”, when you try to use your debt card to make a purchase at a store when you don’t have enough funds in your account, the store will simply decline your purchase. So, you may be a little embarrassed, but you won’t get hit with an overdraft fee or loan charge to make the purchase.
We think this is great news for consumers. Look for an “opt out” form from your bank next year (these new rules don’t go into effect until July 2010).
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