Do You Remember How Overdraft Protection, Overdraft Fees, and Free C...

Calling everyone in the over-40 set to help me remember something. When dealing with those old-fashioned things called “checks,” how did your own overdraft protection used to work?  My recollection is that, back in the day, as long as a person had a certain level of creditworthiness, the bank used to cover your check in a discretionary manner. Then, as I recall, middle class people were encouraged to set up various protections to keep checks from bouncing, such as automatic transfers from savings or a line of credit to cover overdraft accounts.  Why don’t more people use these? Is it because they do not qualify? I keep hearing about $35 and even $39 overdraft fees, on both debit and check transactions, like in the New York Times blog today, and wondering who is paying them. Apparently lots of people, since the $38 billion in overdraft fees earned by lenders in 2009, is double what lenders made off these fees in 2000. Is this the ultimate example of banking for the “haves” versus the “have-nots?”

I became my own research subject this past week when a large check written to us bounced. Five items were presented for which we had no dough. For the first two, we were changed $3 each to take the necessary funds from our savings account, and for the last fthree, we were charged $5 each to borrow money to cover the checks from our line of credit. Total, $21.00. Neither Stewart nor I remember asking for these “protections.” They apparently just offered these things to us when we opened our account at the credit union 14 years ago.  We saved over $100 by having these protections. Surely, this is very different than the overdraft “protection” that everyone has been complaining about. 

Now I am reading a paper linking higher overdraft fees to increases in free checking. Does this mesh with your own experiences, readers?  I cannot remember ever paying for checking. Have some of you seen increases in free checking while watching these overdraft fees go up?