New overdraft rules: What you need to know — and do

New overdraft rules: What you need to know - and doBeginning July 1 for new bank accounts and August 15 for existing ones, banks will now have to offer you the option of enrolling in overdraft protection programs. In other words, they'll have to ask for your permission before they slap you with a $30 fee if you overdraw on your debit card for a $4 cup of coffee.

As a result, banks have been trying very hard to get their customers to sign up for overdraft protection, making it sound like all sorts of dire consequences will come to pass if you pass on their offer of "protection."

"In general, banks emphasize the convenience and not the fees," says Jean Ann Fox, director of financial services for the Consumer Federation of America.

But they may have an uphill battle, says Lauren Bowne, staff attorney for nonprofit group Consumers Union. "Based on the consumer complaints we've received, I'd be surprised if any of these consumers sign up to be charged for this type of expensive overdraft loan," Bowne tells WalletPop.

Here's what will really happen if you decline overdraft protection: If you try to make a purchase with your debit card and the amount of the purchase exceeds the balance, you'll simply be declined. Then you'll have to pull out another card (or cash), or subtract a few items from your tally. It's important to note that the new overdraft regulations don't cover purchases made by check or automatic ACH bill payments, so if you dip into the red on one of those, you can still be charged a fee.

The people who'll benefit most from the new regulation are so-called serial overdrafters, the roughly 10% of bank customers who are responsible for more than two-thirds of all overdraft money banks rake in. Gail Cunningham, vice president of public relations for the National Foundation for Credit Counseling, expresses concern that these are the very people banks will try to target, since they bring in the most overdraft revenue. If you're a serial overdrafter, you should take a step back and tune out the marketing messages, she says.

"These folks would be better off getting to the root of the problem," Cunningham says. "Are their due dates not coinciding with their paychecks? If so, have them changed. Are they not tracking their spending and forgetting to note withdrawals, resulting in the overdrafts? Get organized."

The CFA's Fox adds that it's much more cost-effective for Americans to link their checking accounts to savings accounts and protect themselves from overdrawing that way. "Paying a $10 fee to transfer funds from savings certainly costs less than paying three $35 overdraft fees for less than $10 worth of 'credit,' " Fox says.

Bowne points out that Americans who sign up for banks' heavily-marketed protection plans might not be any better off. "If the person does decide to "opt-in," then there is no limit on the number of times the bank can charge them a fee for overdrafting, so they'll be in the same position they are currently," she says.

"When deciding whether to opt-in to overdraft at their bank, consumers should make sure they get a straight answer about the fees included," advises Jim Kelly, chief operating officer of ING Direct. "If they don't get a straight answer, stay clear."

Kelly told WalletPop via email that he sees Americans today interested in banking products that don't nickel and dime them to death (of course, he also touted ING's checking accounts as examples of such products).

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