Don't be surprised if your bank contacts you this week to ask you to "opt-in" to overdraft protection for your debit card.
After Aug. 15, they won't be able to cover debit card or ATM overdrafts unless you've actively requested the protection. Fail to respond or decline coverage and your debit card will be denied if you accidentally overspend your balance on your kids' back-to-school clothes, for example.
Then again, you'll also be spared the $25 to $35 fee banks charge to advance you the money.
"This is a valuable revenue stream banks want to do everything they can to protect," said Greg McBride, senior financial analyst for Bankrate.com. "As we get to the 11th hour, banks will be getting that message in front of customers who haven't responded."
With overdraft protection automatically included on most checking accounts, U.S. banks brought in about $37.4 billion in overdraft fees in 2009, said Mike Moebs, CEO and chief economist at Moebs $ervices, an economic research firm in Lake Bluff, Ill.
In an effort to better inform consumers, the Federal Reserve issued a new rule in late 2009 that forced banks to get customers' consent by Aug. 15.
Since then, banks have been sticking "opt-in" messages in customers' bank statements, reminding customer service representatives to bring it up when customers call for other services and even putting the opt-in message on their outdoor message boards.
Early results show roughly 90 percent of customers contacted are keeping the coverage, said Moebs, but banks anticipate they'll be flooded with phone calls in late August when customers who haven't opted-in experience debit card rejection for the first time.
Still, most account holders simply don't need the protection, McBride said.
"Most people never overdraw their accounts in the first place," McBride said. "Even if something happened and they would overdraw their accounts, they have other payment options at their disposal. For most people, there is no need to opt in."
About 90 percent of banks' overdraft fee revenue comes from 14 percent of customers who habitually overspend and don't have other options like a credit card to cover critical purchases when their checking accounts are low, McBride said.
But the fees, which are often in the range of $35 even on the smallest of purchases, amount to hefty interest, quickly turning a $4 latte into a $40 indulgence.
Whether you decide to opt in or out, it's a good time to go bank fee shopping, Moebs said.
"I'd look to the Main Street institutions, they offer the better deal: The community banks and the credit unions," Moebs said.
Most banks' early outreach efforts have focused on recent overdraft protection users.
All Susquehanna Bank customers have received fliers about the changes with their monthly statements, but the bank has targeted its most aggressive "opt-in" efforts to customers who have used overdraft protection in the recent past, said spokesman Stephen Trapnell.
"We took a look at customers who had an overdraft charge starting in beginning of 2009 through the spring of this year and did a separate mailing to them with an opt-in form," Trapnell said.
The bank brings in about $12 million a year in overdraft fees,Trapnell said.
National Penn Bank is pursuing a similar strategy, and has been able to reach between 50 and 60 percent of 37,000 customers who have recently used overdraft coverage, said Robin Hitchcock, senior vice president in charge of product management.
About 90 percent have opted to continue the coverage, she said. "Our goal is to educate customers to help them understand how overdrafts work, what the fees are and what their options are so they can make an informed decision."
Some banks, like Quakertown-based QNB, don't offer debit card overdraft protection. It's part of the bank's philosophy of looking out for its customers best interests, said marketing director Brian Schaffer.
"It is a great revenue generator for the bank if you can get people to overdraw their account with debit cards, but we never went that way," Schaffer said. "If you have one of our debit cards, it will actually get rejected."
Most banks offer alternate overdraft protection that takes money from a customer's savings account or a credit account at a much lower fee of $10 per occurrence or lower, said Bankrate.com's McBride.
That's a better option, he said, but the best way to prevent overdrafts is to keep closer tabs on your spending and your balance.
"Overdrafts are completely avoidable," he said. "We have 24-7 online account access. You can sign up for email or text alerts that will tell you if your balance gets below a certain point."
Debit and ATM card overdraft coverage will expire Aug. 15 unless you opt in. What can you do?
Talk to your bank about using transfers from a savings or credit account to provide overdraft coverage. The fees are less.
Sign up for email or text message alerts that notify you when your account gets low to avoid overdrafts.
Keep closer track of your balance to avoid overdrafts.
If you opt for standard overdraft coverage, shop around to find a bank with lower overdraft fees.