Will New Overdraft Rules Increase the Number of People on the ChexSystems List?
Yesterday, the Board of Governors of the Federal Reserve announced a set of rules designed to prevent financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.
The rules are designed to stop the practice where banks charge high overdraft fees for transactions which could have been prevented by issuing a “decline” message during the course of a point of sale or ATM transaction when a debit card is used.
Under the new rules, consumers must be given the chance to “opt in” to an overdraft program. Before opting in, the consumer must be given a notice that explains the financial institution’s overdraft services, including the fees associated with the service, and the consumer’s choices. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act.
Will this increase the number of people on the ChexSystems List?
We think the new rules are great (anything that reduces fees is generally a good thing). However, what happens to people who choose not to use overdraft protection, and overdraw their accounts by mistake? There are some situations where debit card transactions can’t be prevented (for example, in an “off line” debit card transaction, such as at McDonalds or other quick serve restaurants). If the transaction goes through and overdraws your bank account, you’ll get hit with an insufficient funds fee.
Get too many of these, and your bank will report you to ChexSystems.
Get enough bad marks on ChexSystems, and you’ll have your bank account closed down, and you’ll have a heck of a time opening a new bank account.
It’s a vicious cycle.
Of course, the best thing to do to prevent all of this is to make sure you know exactly how much money is in your bank account at all times, and never overdraw your account. But this is (maybe) asking too much of people. As the New York Times once put it — “Balancing a Checkbook is Not Calculus — It’s Harder” (see the original article, here).
Stay tuned, and let’s see how the new Overdraft Rules work out for the consumers.
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I am unfortunate to be on the Chex Systems and don’t know when I will get off of it.
I used to work at Ruby Tuesday, they required direct deposit (even though I didn’t have a bank account) and so they gave me one of their Prepaid Debit Cards to be paid on. Unfortunately, their card was pretty bad. But, from what I hear, it was typical because most cards either have a monthly fee or pretty limited as to the free items. I have worked at Starbucks for about 8 months now and they allow us to have a card called the Money Manager Card. The choice was pretty simple because there are no monthly fees, I can use it on their network (allpoint atms) free at all times, never any fees to buy things (signing or using my PIN and getting cash back if I want…all without a fee or surcharge), no overdraft. Let’s just say I haven’t paid a fee in the entire time I’ve had the card. It’s pretty simple to use it at no charge and I really don’t have to tip-toe around any limited free items like most other cards I have seen have.
Oh, and don’t lose most payroll cards! If you do, it’ll cost you $$ even to get the replacement sent by the post office. My new card give free replacements when delivered by the post office all of the time. Or, if I want, I can get it delivered by Fedex for $10. Pretty reasonable as I sent something by Fedex a month ago and paid $14!
My point is, if you are a company and are going to get your employees something, don’t do what Ruby Tuesday did and get something that costs your employees $$$ to use it! I hated them for “giving” us that card…IMHO of course.
I should state that Walmart has something that is similar sounding to Money Manager Card. I think it is the Money Card or something like that. That card is definitely not the same.
I did a quick Google search on Money Card when investigating the Starbucks offering and mistakenly clicked on a link to a Money Card “problem” page where people complained about it. Then, I realized that “Money Card” is not “Money Manager Card”.
Thought I would let you know so you don’t make the same mistake. In fact, in many ways, my new card is better than my bank account ever was! So, while I am on the Chex Systems, it doesn’t adversely affect me IMHO.