What happens when you swipe your debit card and you don't have enough money in the bank? Does your bank "lend" you the money, resulting in the notorious $38 latte?
Overdraft protection plans allow you to make purchases and repay the bank if your checking account won't cover the bill, but fees are steep. Regulators didn't like this, and required banks to get your permission (or opt-in) before allowing those fees to be charged.
Unfortunately, some banks didn't explain everything clearly. Overdraft protection is a great deal for the bank, and they wanted to keep a good thing going. Instead of helping consumers choose, some banks scared their customers in to signing up for expensive overdraft programs. Consumerman reminds us that overdraft protection is optional, and that a lot of people signed up for it without knowing what they were doing.
Now that the flurry of marketing materials is behind us, take a look at your checking account to see if you're using the right overdraft option (or if you need any "protection" at all).
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Thanks for the information. I always thought that overdraft protection is mandatory even though I never go over.