Financial Tip of the Week from the Iowa Bankers Association:
Iowa merchants and consumers need to be aware of a new federal rule that could lead to a significant increase in debit card transactions being denied at the point of sale. Compliance with this rule is required of all financial institutions and becomes effective July 1, 2010, for new accounts and Aug. 15, 2010, for existing accounts.
The new Federal Reserve Board Regulation E rule gives consumers a choice to opt-in to their financial institution's overdraft protection service program for ATM and one-time debit card transactions. If consumers decide to opt-in, nothing changes – financial institutions will continue to assume the risk involved in covering overdrafts and charge a fee to the card holder in the event the account has insufficient funds. If consumers decide against opting-in to a program, and have insufficient funds in their account, their transaction will likely be denied at the point of sale.
All financial institutions must comply and all are preparing communications with customers regarding their choices and obligations. To help Iowans better understand the new regulation and what their options are, the Iowa Bankers Association offers the following tips and information:
Options for Account Holders
The best and easiest way to avoid overdraft fees it to keep track of your transactions and account balance. If you keep extra money in your account -- a cushion -- you will be less likely to overdraw. Some banks offer to send you an alert by phone, e-mail or text message if your balance falls below a designated amount. Check with your bank to find out what options are available.
More information on the new overdraft rules is available on the Federal Reserve's consumer information website at www.federalreserve.gov/consumerinfo/wyntk_overdraft.htm
These financial tips are provided by the Iowa Bankers Association (IBA), representing banks and thrifts in the state. For more information, go to www.iowabankers.com.