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Beware New Checking Account 'Opt-In' Rules

The Fed rules do not cover checks or automatic bill payments -- banks can still authorize and pay overdrafts for these transactions at their discretion and charge a fee. If you do not want your bank's standard overdraft practices in these instances, talk to your bank; they may give you the option to cancel.

Statistics on how many people opted for overdraft protection are not yet available. A July poll by the National Foundation for Credit Counseling found 26% of 2,089 respondents intended to opt in for overdraft protection.

If you are interested in the overdraft protection, be sure to read the fine print carefully to understand its costs and limitations. If your account remains overdrawn, for example, you might incur additional fees, and banks can charge the items to your account in any order they choose. A judge in California issued a $200 million fine Aug. 10 against Wells Fargo (WFC - Get Report) for using a "bookkeeping device" to pay customers' most expensive charge first, increasing the chances an account would be overdrawn so the bank could charge more fees on subsequent charges. "The bank went to considerable effort to hide these manipulations while constructing a facade of phony disclosure," CNNMoney reported the judge as saying in his finding.

Finally, even if you choose to opt in, the payment of an item is discretionary. Banks will choose which transactions to cover, so a consumer can't always can't count on having overdraft protection when it's needed.

Your bank may offer less expensive alternatives to overdraft protection. Some banks allow you to create a link to your credit card, savings account or line of credit that will fund overdrawn transactions. There is a fee for each transaction, but it is typically $5 to $10, much less than the overdraft protection. You must contact your bank to set up this alternative service, since it is not part of the opt-in selection.

-- Reported by Bill Hardekopf of

Bill Hardekopf is chief executive of, which compares and rates more than 1,000 credit cards. He is the co-author of "The Credit Card Guidebook."
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