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Beware New Checking Account 'Opt-In' Rules

NEW YORK (TheStreet) -- Federal Reserve rules on checking accounts started this past weekend, and some Americans may be surprised by the changes, especially this one: Overdraft protection is no longer available for checking accounts unless customers "opted in."

Before these Federal Reserve rules took effect, most banks automatically added overdraft protection to checking accounts, providing the details and fees in the fine print. Some customers didn't realize the high price of the fee until they incurred the charge.

An overdraft occurs when there isn't enough money in a checking account to pay for a transaction, but it is paid by the bank anyway. This isn't free; it's a loan from the bank, and banks charge a nonsufficient-funds paid item fee -- typically $30 to $40 -- for each transaction paid in this manner.

If you didn't opt in for this, your bank's standard overdraft practices no longer apply to your everyday debit card and ATM transactions. Now transactions will typically be declined when you don't have enough money in your account, but you will not be charged overdraft fees.

The rules don't lock you to your choice forever; you can still make changes to your account, opting in or out of overdraft protection at any time.

The rules are good for consumers but reduce revenue for banks. Some banks will try to persuade customers to choose the "benefits" of overdraft protection, since they are anxious to hold on to as much fee income as they can. The Consumerist website reported last week on the branch manager of a bank who quit because he felt his employer was forcing him to trick customers into signing up.

This is a good time to sign up for free online alerts offered by most issuers. You can get a daily text or e-mail telling you the balance in your account. Knowing the amount of money in your checking account can help avoid the embarrassment of a declined purchase.

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