By Dawn Hicks

The answer is yes. 
Many confuse bounce protection and overdraft protection, assuming they are the same. There are slight differences. Bounce protection (also known as “bounced-check protection” or “courtesy overdraft protection”) does not involve a contract or a monthly fee, is not subject to the guidance of Regulation Z (Truth in Lending Act) and gives the financial institution the option of paying an overdraft.  On the other hand, overdraft protection does involve a contract and a monthly fee and is subject to the guidance of Regulation Z, and the institution is obligated to approve the overdraft as long as the funds are available in another of the consumer’s accounts.

Consumer Concerns

• Automatic enrollment of consumers into a bounce protection plan incurs per-bounced check fees and a daily fee (of $2 to $5) that accrues until the balance is paid.  
  
  
• Automatic enrollment, rather than a contractual agreement, gives the bank the right not to pay an overdraft at any time despite previous payments of overdrafts.
  
  
• Consumers must opt-out of this service to avoid these charges despite the fact that many may not even be aware that they are enrolled.
  
  
• With bounce protection and overdraft protection, some banks pad the consumer’s account by including the overdraft privilege amount in the available balance of a transaction account on the ATM receipts and through automated telephone banking systems.

What the Consumer Should Know
The best way to avoid overdraft fees is to keep record of all account transactions. One who maintains good records and keeps track of checking account balances may not need overdraft protection or bounce protection.

Overdraft protection, however, can be a good product for the person who would rather pay a monthly fee than have checks or point-of-sale transactions denied while incurring an overdraft fee from his bank as well as one from the payee (entity to whom the check was written). It’s a matter of choice and what works best for the consumer.

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