Frequently Asked Questions: New Overdraft Regulation
What does this regulation mean?
Recently a regulatory change has occurred that now requires banks to obtain customers’ permission before allowing overdrafts to be paid on ATM and everyday debit card transactions. The new regulation does not apply to overdrafts by check, ACH, automatic payment, online bill payment, or recurring debit card transactions.
What is the difference between an everyday debit card transaction and a recurring debit card transaction?
Everyday debit card transactions are normally for merchant purchases such as groceries, fuel, and restaurants. Everyday debit card transactions may also be referred to as “POS (Point of Sale) transactions” and “one‐time transactions.” An example of a recurring debit card transaction is when a debit card number is provided to a company for an on‐going payment, such as a utility bill.
What is an overdraft?
An overdraft occurs when there are not enough funds in the account to cover a transaction. The Bennington State Bank may choose, at our discretion, to honor this transaction. We cannot guarantee that the bank will cover every transaction that may take your account negative; however, we will continue to honor these transactions whenever possible.
Why do banks pay overdrafts?
Banks pay overdrafts because people are often willing to pay a fee to have important payments paid even if they don’t have enough money in their account. For example, you may want the bank to pay a check or electronic or automatic payment made to a store, mortgage company, or landlord because if it is returned, you might have to pay a fee to the payment recipient and also because in the future, your checks or electronic and automatic payments may no longer be accepted. People may also want their ATM and other debit card transactions paid in order to avoid embarrassment, to help them in an emergency, or to get through a temporary cash-flow problem.
How will this change affect the way I do business today?
By choosing to “opt-in”, your ATM and debit card transactions will work EXACTLY AS THEY DO TODAY. Your authorization provides important protections for you in the event you are running short of cash or simply make a mistake in your checking account. Your authorization gives us permission to cover that transaction so you can avoid the embarrassment of having your transaction declined at the grocery store or at your neighborhood restaurant. If you choose not to “opt-in”, any ATM or debit card transaction that forces your account negative will be declined and an alternative form of payment would be required to continue your transaction.
Why would I want to authorize this service?
Because you prefer to have your accounts operate EXACTLY AS THEY DO TODAY. Many customers appreciate this service because it saves them the inconvenience and embarrassment when making purchases and provides access to funds at the ATM in urgent situations. A scenario that may affect your debit card transaction is as follows: When you use your debit card to purchase gas, many gas stations pre-authorize your debit card transaction for a set amount (for example, $50).You may intend to only pump $10 worth of gas, but because of the pre‐authorization, your transaction could be declined if you have less than $50 available in your account. By “opting-in”, you would avoid this inconvenience at the pump.
Do both parties on a joint account need to agree to the service?
No. Any party on a joint account may make this decision and it applies to all joint account owners.
Do I need to complete the authorization “Opt-In” form?
Yes, if you want to continue to operate exactly as you do today. No response is necessary if you do not want to “opt-in”. When you receive a notification by mail, please follow the instructions to “opt-in” and visit your personal URL or complete the attached form and mail it back in the enclosed envelope. A confirmation will be sent to you for your records.
Can I change my option at a later date?
Yes. If a customer “opts-in” to authorize overdraft transactions, they may “opt‐out” at any time by notifying the bank.
What should I do if I want to authorize The Bennington State Bank to honor ATM and everyday debit transactions if I overdraw my account?
You may choose any of the options below:
- Visit your personal URL:
Visit the personalized web address that was created specifically for you. The log in and password are on your notification letter.
- Sign and return your Authorization Form:
Complete and sign the authorization form and send back by US mail.
- Visit any of The Bennington State Bank branch offices:
Complete and sign the authorization form you received in the mail for each account attached to an ATM/debit card and return it to any of our locations.
If I “opt-in”, will the bank always pay my ATM and everyday debit card transactions?
No. These standard overdraft services are an accommodation provided at the bank’s discretion. Unless you have signed up to link your checking account to another account, such as a savings account, the bank does not guarantee that ATM and everyday debit card transaction will be paid, even if you “opt-in”.
If I do NOT “opt-in”, does it mean that I will never overdraw my account using my debit card for ATM and everyday transactions?
No. There are limited circumstances when it will not be possible for the bank to avoid paying an ATM or other debit card transaction you made, even if there is not enough money in your account. You should not assume that because the ATM or other debit card transaction goes through that there is enough money in your account to cover it. In these cases, the bank may not charge you an overdraft fee, but you still must re-pay the bank to cover the overdraft.
Why does the regulation apply only to ATM and everyday debit transactions?
The regulation was intended to ensure that customers understand overdraft services when making an ATM transaction or debit card purchases at merchants, thus providing the choice to avoid fees by having these specific transactions denied.
What is the overdraft fee if I choose to authorize the service?
The fee is the same as if the account is overdrawn by check or a pre‐authorized debit payment —up to $20 per ATM or debit card transaction. The fee is a service fee, not a penalty. When we authorize payment without sufficient funds, there is an element of risk on our part. The fee is charged to offset that risk.
What does this service cost?
There is no charge to your account if you do not use the service. If you should overdraw at the ATM or with your debit card, it is the same fee as if the account were overdrawn by check, which is up to $20 per item.
How does the bank know my debit card transaction is a one-time, everyday transaction versus a recurring transaction?
The type of debit card transaction is determined by a special code the merchant submits with the payment transaction. If the merchant codes the transaction incorrectly, we will not know and will process the transaction as instructed.
If my transaction is declined do I still get charged?
No. If an ATM or everyday debit card transaction is declined there is no charge. Many customers appreciate the ability to overdraw at the ATM for family emergencies. They also appreciate us paying their items because it can save them the inconvenience and embarrassment of a declined transaction.
May I “opt-in” at the time of the debit card transaction?
No. You must “opt-in” in advance. The Bennington State Bank is required by regulation to provide you written confirmation of your “opt-in” request and will not change your account record until that confirmation is sent. If you think you will want your ATM and everyday debit card overdrafts paid and are willing to pay for it, you should “opt-in” before you need it.
How many overdrafts will the bank cover? How large of an overdraft will the bank cover?
We strive to honor as many of these requests as we can. We look at a number of factors like how long a customer has been with us and the deposit history of the account. All items are paid or returned at the bank’s discretion.
How can I avoid overdrafts?
The best way to avoid overdrafts is to keep a current and accurate transaction register and balance it to your monthly statement. Also, be sure to record automatic payments, bill pay transactions, debit card purchases, etc. Information from online banking, telephone banking, or ATMs can be very helpful sources, but they do not reflect outstanding transactions that have not yet been posted to your account. If you need any assistance with learning how to reconcile your statement, we will be happy to help you.
What if I do not do anything?
If we do not receive a response from you, we will decline any insufficient ATM and everyday debit card transaction beginning on August 15, 2010.
What if I do not have an ATM or debit card, do I still need to “opt-in”?
No. The regulation only applies to personal accounts which have been issued a debit card.
I have a debit card, but do not use it; do I still need to complete the form?
Yes. The regulation applies to all accounts with a debit card whether it is used or not.
Does this change apply to business accounts?
No. All of Regulation E, including this amendment, is a consumer regulation only. It does not apply to business accounts.
For Additional Information:
The Bennington State Bank
Salina – Bennington – Minneapolis - Wamego
Important Details about The Bennington State Bank ATM and Everyday Debit Card Overdraft Coverage:
Beginning 8/15/10, we will no longer authorize and pay overdrafts for ATM withdrawals, debit card purchases and everyday debit card transactions without your approval and acknowledgement that you want continued coverage for these transactions. An insufficient funds fee of up to $20 for each item causing an account to be overdrawn may be imposed for covering overdrafts that result in a negative end of day balance. Overdrafts may be created by check, in-person withdrawal, automated clearing house (ACH) or electronic transaction, phone or internet banking transfer or withdrawal, ATM withdrawal, debit card withdrawals and usage or other electronic means. You must pay your overdrawn account balance in full upon demand. Whether an overdraft will be paid is discretionary and we reserve the right not to pay.