According to a survey by the Pew Charitable Trusts, many consumers are confused by banks’ overdraft practices and federal rules governing them. Overdraft coverage allows checking account holders to use more money than they have in their account, either through an advance from the bank or a transfer from another account held by the individual.
Federal regulations require consumers to agree to overdraft coverage on their debit cards for the coverage to apply, but Pew’s survey finds that 52% of those charged an overdraft fee do not recall agreeing to the coverage. Pew research finds that banks typically charge a $35 penalty fee for an advance or a $10 fee to transfer funds from another account. If consumers do not agree to overdraft coverage, banks decline a transaction when the account holder does not have enough money in his or her account, and the bank does not charge a fee. Pew’s survey finds that 68% of overdrafters would prefer to have their transactions declined than pay an overdraft fee.
