Debit Card Overdraft Insurance - New Survey Reveals Customers’ Preference

According to a recent nationwide poll conducted by Consumer Reports National Research Center, only 22 percent of respondents chose to purchase debit card overdraft insurance. New banking policies stipulate that financial institutions must secure the account holder’s permission before enrolling them into any overdrawn account programs.

Seventy percent of respondents acknowledged they wanted the same opportunity to opt-in or not regarding set fees to cover bounced checks.

“Now that banks are no longer allowed to automatically enroll customers into high-cost debit overdraft loan programs, the vast majority of consumers are saying ‘no thanks,’” said Pam Banks, Senior Policy Counsel for Consumers Union, the nonprofit publisher of Consumer Reports. “Consumers shouldn’t opt-in to high-cost overdraft loan programs because there are more affordable options available when checking account funds fall short. Bank customers should have the same right to choose when it comes to overdraft programs covering checks.”

Other results show that 55% of bank customers had an overdrawn account at least once the previous 6 months. 39% of those overdrawn accounts opted not to purchase overdraft coverage.

However, a significant majority of 70% responded they would prefer to have a choice to pay a fee that would cover bad checks due to overdrawn accounts. Nearly half suggested they would choose to pay a fee with just over a third declining such offers.

The Consumers Union wants to make known that there are less expensive options than insufficient funds fees and late fees in general. They suggest consumers ask their bank representatives to see if they allow customers to link several accounts together. In the event of an overdraft, the overdrawn account would just take funds from an account with a positive balance. For example, the checking account would borrow money from a savings or a credit card account. This would reduce the present fees and also make insurance coverage unnecessary in most instances.

The FDIC continues to review further regulations. It is expected to at least require banks to make the customer aware of the least expensive overdraft protection option.