ATM Overdraft Fees Need Your Opt-in — and You May Not Remember Giving It

You may have opted into ATM overdraft fees without even realizing it.

Some people figure this out after withdrawing money from an ATM, incurring a negative balance and ending up with an overdraft fee. Luckily, it’s easy to verify if you have opted into this service, knowingly or not.

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Why you have to opt in to ATM overdraft fees

Regulation E is a government regulation that requires that banks have you opt into overdraft services before charging overdraft fees for ATM withdrawals or debit card transactions that exceed the available balance. Affirmative consent via written or electronic confirmation is required, and the customer must also be informed that they can revoke consent at any time.

An overdraft occurs when a bank approves a transaction that exceeds your balance. Then, you receive an overdraft fee since the bank had to essentially lend you money to complete a transaction. However, overdraft services do not guarantee that every purchase that exceeds your balance will be approved. Consumers who incur overdrafts often may face more restrictions.

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The rule doesn’t cover every kind of overdraft

The opt-in requirement for Regulation E only applies to ATM withdrawals and one-time debit card transactions, not every overdraft service. Checks, ACH transfers and certain recurring electronic payments can be treated differently. That means you may still receive overdraft fees even if you opt out of overdraft for ATM withdrawals and debit card transactions.

Some banks are more flexible with overdrafts. While some banks charge you immediately when your balance becomes negative, others give you an overdraft line of credit, which lets your balance stay negative without incurring an overdraft. Some banks also let you link another account so they can pull from that balance to prevent your checking account from having a negative balance.

While overdraft services can be convenient for one purchase that needs to go through, you don’t want to get used to spending more money than you have in your accounts.

How to check whether you opted in

You can typically check your status by logging into your bank account and searching your account settings, then looking for “overdraft,” “overdraft coverage” or similar language. That usually shows relevant information that can help you go deeper into your settings and opt out.

If you cannot find out if you are opted in or not, you can contact a representative and ask if you are opted into overdrafts for ATM withdrawals and debit card transactions. It’s also a good idea to request a copy of the opt-in or confirmation if you do not recall opting into this option. You can ask the representative to opt you out on the spot.

Opting out will prevent overdraft fees from accumulating on those types of transactions — but it also means those withdrawals and purchases will be declined instead of being approved for an overdraft fee. You won’t avoid overdrafts entirely, as some transactions can still overdraw your account. If you disagree with an overdraft fee, you can dispute it with the institution or the Consumer Financial Protection Bureau.