A Case for Overdraft Protection
Mike Welch's April 9th column, "Putting a Little Bounce in Checking Accounts" was right on. In November 2001, following 9-11 with many members deployed and called up, we decided to begin overdraft protection (ODP) for them and their spouses. With all of their problems, we didn't want a spouse burdened and embarrassed chasing down an NSF check and being hit with a merchant fee. At that time, without software to support ODP, we advised Commanders and First Sergeants to ask spouses of deployed to contact us. As they called, their accounts were coded for ODP and we manually provided the service, just for them. By December 2001, with software in place we turned on the service for all checking members in good standing. For new checking accounts, we waited for the greater of 60 days or 22 checks clearing without an NSF before paying checks that wouldn't clear. While we do not advocate writing bad checks, we do track the program. Our CFO established a base trend line for NSF activity without ODP. Monthly tracking proved significantly more NSFs starting in January 2002. Obviously, with increased NSF activity and low losses, we made money on the program without increasing our NSF fee. Members, in effect, made money too. In 2002, they saved over $3 Million in merchant fees. In fact, one major merchant privately complained about loss of bad check fee income. Do members who save fees, with such peace of mind and convenience, really need the paternalistic watch care of those who would protect them from themselves? Arno J. Easterly, Jr. President & CEO Barksdale Federal Credit Union Bossier City, La.