RICHMOND, VA (WWBT) – On Monday, expect changes at your bank. A new Federal Law will prevent them from charging overdraft fees unless you sign up for it.
The old rule gives consumers a pass, but charged you if you didn't have enough money in your account to cover a purchase. Under the new regulations, if you don't have the money - the banks won't cover you. Now you must opt-in, or opt-out of overdraft protection.
If you opt in banks will charge you, but still cover your missing funds. If you opt-out and don't have the money in your account, your card will be declined.
"Make sure you manage your bank account," said James Sclater, with Clear Point Financial Services.
Credit Counselors say consumers have to select an option based on their financial responsibility.
"Accidents do happen, so if that is going to be the case you have to pick what option works best for you. Some people don't have the ability to carry cash on them all the time as a fluff, so the key would be to move it to a savings account or I do recommend a savings account, just in case of emergency and that emergency in this case could be going over your credit line," said Sclater said.
If consumers don't select an option, banks will automatically place the customers in the opt-out category. If you are great at balancing your account, the new changes may not impact you. But if you are constantly racking up overdraft fees, financial experts say you may want to have the protection.
"So the rule of thumb there is to make sure you carry extra cash in hand or put a $100 fluff in your account so in case you have miscellaneous charges and you go to buy a cup of coffee it doesn't cost you $40 for a $3 cup," Sclater said.
The new overdraft rules only apply to ATM withdrawals and debit card purchases --not checks or automatic bill payments. With these, banks can still cover the cost and charge you the overdraft fee. The goal is to protect consumers from overwhelming banking fees but experts talked say don't count this as a huge victory.
"They are changing the way financial institutions do business to help to protect the consumer but sometimes it can be a double edge sword and what will happen now is that the bank will figure out another way to make charges up," said Sclater.