Overdraft Privilege Can Be a Double-edged Sword L. Wayne Mansur, TCCU President and CEO From time to time, I feel compelled to talk about the double-edged sword that is Overdraft Privilege (ODP). In fact, it is required by law that we do so regularly with our members in such a way that they are kept informed of both the great benefits of using ODP and the costs that can be associated with its use. This information is primarily for the benefit of TCCU members, but the basic concepts apply to just about any overdraft protection program at any financial institution. If you are not a TCCU member, you should consult with your particular financial institution regarding how overdrafts are handled. First, let me clarify what Overdraft Privilege (ODP) is, and what it isn’t. ODP is a service that we extend to our members which allows us to cover a check the member has written that might otherwise have been returned to the merchant for nonsufficient funds (NSF). When a check “bounces” due to nonsufficient funds, the account is typically charged $25. Sometimes, the merchant will resubmit the check to the credit union a second time, resulting in another $25 fee. On top of all that, the merchant will often charge a “bad check fee” of their own of $25-$50, threaten you with legal or collection actions, and embarrass the heck out of you in the process. In the end, one bad check can end up costing you $50 to $100, a lot of hassles, and unnecessary embarrassment. With ODP, if you qualify, and if the amount of the check is within your ODP limit (including the ODP fee), TCCU can choose to cover the check. This saves you considerable time and money, and the cost for this service is $25. Please keep in mind, this is not a penalty. Overdraft Privilege is a service that we offer, and the ODP fee is assessed only when you choose to use it. You make that choice when you write a check for more than you have in your account. If you do not wish to take advantage of this service, you may opt out of it at any time. Just speak to a Member Service Representative. There are also alternatives to ODP. For example, you may arrange to have money automatically transferred from other deposit accounts to cover your overdraft for a fee of $2 in each instance. You may also apply for a line of credit that would cover your check up to your credit line, and pay interest on that transaction as you would any other type of loan. To better assist you in managing your ODP associated costs, we’ve updated our monthly account statements to give you a better idea of the overall cost to you of ODP fees. We also have an informative brochure called “Overdraft Privilege: We’ve Got You Covered” which explains how Overdraft Privilege works, and how using it judiciously can save you time, money, and headaches. Like any tool, Overdraft Privilege can be abused. When that happens, this financial convenience can become a heavy financial burden to you. The average consumer pays seven NSF fees per year - - that’s $175. Is the convenience worth it to you? Only you can answer that question! |
