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Opting in for overdraft protection: Beware of scammers

I received an email today from my bank asking me to opt in for overdraft protection. Ignoring for a moment whether or not I should take advantage of a service that costs me $29 to spend money I don’t have, I realized that the email may not be legitimate.

Some background information on overdraft protection

For years, banks have auto-opted all checking account customers into overdraft protection. Meaning, instead of declining a $2.64 expenditure at McDonald’s due to insufficient funds, the bank allows the transaction to go through and charges you in the neighborhood of $30 for the convenience.

The Center for Responsible Lending conducted a survey among consumers and we resoundingly said that we did not want to be auto-opted in.

So new government regulation, effective as of July 1, is requiring all banks to un-enroll everyone unless they opt in to the service.

Opportunity for scammers

Scammers and phishing sites are always looking for prime opportunities to convince unsuspecting consumers pass along personal information such as your social security number or bank account numbers.

The email that I received asked me to follow a link and enter personal information in order to opt in. Having clicked through, I didn’t recognize the site or web address. The top graphic had my bank’s logo and coloring, but that’s easily duplicated. The only ounce of comfort that I saw was the fact that the site was secure (https).

Being the paranoid individual that I am, I closed my window and called my bank. The email was indeed legitimate.

Interestingly enough, banks are varying how you have to opt in. In the case of my bank, I received an email with a link to an opt in form online. My coworker who uses Chase, received a letter asking him to either fill out a form and mail it in or go in to a branch to sign-up.

Call your bank

You will want to make sure that you know how your bank is handling the new Federal regulation. If you have not received notice or have and are unsure whether it’s valid or not, simply call your bank and speak with a representative. They should be able to tell you specifically what they are doing/sending and what information you are required to provide in order to opt in to overdraft protection.

On a side note, you don’t need overdraft protection

Do you really need overdraft protection? Yes, it is very embarrassing to be out with friends or on a date and have the waiter tell you that your card has been declined. But is a $30 charge really worth it?

I recommend one of the following alternatives:

  • Overdraft Line of Credit: With both of my banks, I have a small overdraft line of credit. In the event that I go below a zero balance (it happens to all of us), then I am not charged any fees and the purchase is approved. Since I check my balances daily, I payoff the line of credit within 24 hours and incur only pennies in interest at best.
  • Proper Budgeting: If you don’t have the money in the bank to spend, then don’t spend it. Enough said.
  • Secondary Account: My online bank allows me to have money pulled from a second account at no cost if I spend too much. See if your bank has this option.

In short, don’t pay unnecessary bank fees (i.e. a stupid tax). If you like this post, then consider subscribing to the RSS feed. Thanks!

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