Washington Post columnist Michelle Singletary recently wrote about an important change in the rules on overdraft protection that will apply to any consumer who uses an ATM or debit card.

The Federal Reserve has proposed giving bank customers the right to choose whether to enroll in overdraft protection for ATM withdrawals or debit card purchases. Opting out of pricey overdraft protection would be a good move for anyone who’s ever been dinged by a $35 fee for erroneously believing an ATM or debit card wouldn’t let them spend money they didn’t have.

Most consumers believe debit cards are the same as cash — some even consider it the “good plastic.” Yet the Federal Deposit Insurance Corp. (FDIC) conducted a study last year that found that 81 percent of banks allowed overdrafts on ATMs and debit transactions. And 92 percent of the banks in that survey did not have policies to inform customers that they lacked enough money in their accounts to cover their purchases before assessing fees averaging $27.

The Federal Reserve proposal would allow consumers to opt in or out of overdraft protection, but Ms. Singletary has a better idea:

The more consumer-friendly way to address this problem is to allow people to be informed that they are broke before a transaction is approved. At that point, they can decide whether they want to accept the overdraft protection and the fee. I doubt the banks will suffer a significant loss of income. There are plenty of people who will still choose to pay the price for this service.

Bank patrons have a responsibility to monitor their accounts diligently and make sure they aren’t overspending. But Ms. Singletary is right that informing consumers before they overdraw their accounts would save many people lots of hefty fees.

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