Make today the day you stop being fooled by your bank. Opt out of overdraft protection.
For most people, overdraft protection is not a safety net. It's more like a trap. Yet despite new regulations that require banks to give people the opportunity to opt out of checking account overdraft protection programs, most people have decided to stick with them. It could be an expensive choice. That's why the MoneyRates.com resolution for June is to opt out of overdraft protection.
The high cost of 'protection'
The most recent MoneyRates.com checking account fee survey found that the average overdraft fee was $29.16. Suppose you keep an average of $500 in your checking account. That means if you have just one overdraft over the course of the year, it's going to cost you nearly six percent of your account. If you have five overdrafts in a year, overdraft protection would cost you about 29 percent of your account. When you think of it that way, it doesn't really sound like protection, does it?
Plus, there's more to this than just the direct costs. If you can't keep track of what is in your checking account and control your spending accordingly, how are you ever going to budget successfully? Opting out of overdraft protection could encourage better personal finance habits that would pay off in the form of higher savings over time.
Consumers need to take a second look
Despite the dubious benefits of overdraft protection programs, a study by Moebs $ervices found that 75 percent of checking account customers typically opted in for those programs when given the choice last year. Shockingly, the opt-in rate was almost universal among people who incurred ten or more overdrafts per year.
Ten overdrafts a year! That would come to an average of $291.60 in annual fees. Is it any wonder that banks love overdraft programs? That's all the more reason why you should make it your resolution this month to break the habit, and opt out of your checking account overdraft protection program.
The original article can be found at Money-Rates.com:
"MoneyRates 2011 Resolution #6: Opt out of overdraft protection"