Recent government regulations will require credit card issuers to obtain customer’s approval before charging fees to cover overdrafts as the result of ATM withdrawals and debit-card transactions.  This fee is known as courtesy-bounce protection and is usually automatically included with the card unless customers choose not to do so.

According to a Federal Deposit Insurance Corp (FDIC) report, this service costs $10 to $38 per transaction.  It is a common practice for credit card companies to deduct the largest purchases first to drive the account balance below zero so they can charge overdraft fees.

With the new FDIC approved regulations, financial institutions can not charge fees for this type of service unless the consumers opt in to them in advance.  The regulations will be implemented July 1 for new accounts and August 15 for existing ones.  These same changes also apply to ATM transactions.  Customers who don’t participate in this service will have their transactions denied if they don’t have sufficient funds to make the withdrawals, unless the associated bank decides to honor the transaction without implementing a fee.  The new rules, known as Regulation E, do not apply to paper check transactions or recurring payments made by debit cards.

The Regulation E changes are projected to affect 25 percent of consumers who overdraw their accounts at least once a year.  These same people can avoid overdraft situations by simply keeping adequate records of their accounts.  This can be easily accomplished online or with text message services provided by most credit card issuers.

Implementation of these new rules are also expected to affect the 75 percent of people who never overdraw their accounts as card issuers seek to offset revenues lost by these new regulations.  These impacts will take the form of increased fees.

A majority of banks have already begun recruiting customers to opt in to their courtesy bounce services to minimize the impact on their revenue.

A regional president for Wells Fargo in San Francisco, Michael Billeci, said, “We have reached out to customers in a variety of ways, through statement inserts, online messaging, in-store communications and people are receptive to opting in.”