Would you ever consider paying $40 for a latte or $35 for a candy bar? Not likely, but this is precisely what occurs when you are assessed an overdraft fee for exceeding your account limit. The new amendments to Electronic Fund Transfer Act (Regulation E) could change this by placing the future of overdraft fees for certain transaction types in the hands of consumers.

Starting August 15, financial organizations will no longer be able to assess an overdraft fee for everyday debit card transactions or ATM transactions that exceed your available balance unless you have opted in. “Some people use their debit card without knowing how much money is in their accounts,” says David Garber, Financial Center Manager with Fifth Third Bank. “Under Regulation E, if you haven’t opted in – and there’s no money in your account – your transaction will be denied, rather than going through and you paying an overdraft fee.”

Your financial organization is required to send you information about its overdraft services – including fees associated with the service – and explain your choices so you can make an informed decision.

Weighing the pros and cons
Deciding whether to opt in or out to the overdraft coverage is a personal decision. Consider the pros and cons for both options:

• Opting in – If you want the flexibility of going over your available balance, without having transactions denied, you may prefer this option.

• Pro – You can avoid the embarrassment of having your debit card denied if you exceed your available balance.
• Con – You will have to pay an overdraft fee if you go over your balance limit. At most financial organizations, this fee ranges between $10 and $40.

• Opting out – If you want to avoid paying any additional fees or don’t anticipate going over your account balance limit, you may prefer this option.

• Pro – You can avoid paying overdraft fees for everyday debit card or ATM transactions if you go over your available balance.
• Con – You won’t have the option of instantly exceeding your available balance in the event of an emergency.

Overdraft coverage versus overdraft protection
Keep in mind overdraft coverage (Regulation E) is different from products commonly called overdraft protection. The differentiating factor is overdraft protection allows you to link a checking account to a credit card account, a savings account or equity line of credit. If you go over your account balance, funds are drawn from your back-up account so you avoid having the transaction denied or an overdraft fee as long as you have sufficient funds to cover your charge. “It’s not a bad idea to have both overdraft coverage and overdraft protection,” Garber says. “This way you have more coverage.”

Learn more through our online tutorial
Fifth Third Bank is dedicated to helping you understand all of your options. Our financial professionals are available to meet with you to answer your questions. We also offer an online tutorial about Regulation E so you can learn more about it at your convenience. “We want you to understand your options so you can make the right decision for your situation,” says Garber.

To learn more about Regulation E, contact Fifth Third at (866) 475-4201 or visit 53.com.