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There may be no such thing as a free lunch, but it costs very little–if any–to provide your account holders with the tools to defend against the consequences of an economic slowdown or reversal. Recent survey results from GoBankingRates.com and reported by CNBC point to respondents’ ability–and often their inability–to cope or react to financially impactful events including job loss and unexpected healthcare, home or auto expenses. As stewards of your their assets, it makes good sense for your bank or credit union to frequently recommend cautious financial management practice.

The low-hanging fruit in this discussion, judging by survey participants’ responses, would have financial institutions advising their account holders to:

  • Correct ill-advised spending habits and/or add income sources to escape the 49% of Americans living paycheck to paycheck.
  • Build savings or cash reserves covering 6-12 months of living expenses to prepare for longer-than-anticipated interruptions to careers and incomes; 61% of respondents fail the six-month threshold.
  • Update resumes and become knowledgeable of current job search practices. Nearly 80% of respondents can’t readily respond – either financially or emotionally – to the loss of a job.
  • Re-evaluate assets’ susceptibility to risk, and adjust accordingly, in anticipation of a potential recession recurrence. Most respondents – 68% – are not accounting for market reversals or worst-case scenarios in their investment strategy.

This same clarity of counsel applies to how a fully disclosed overdraft program should be communicated to account holders. Prolonged and relatively good economic times featuring low unemployment and affordable borrowing can lead to overly optimistic consumer spending, and even checkbook errors. With a clear understanding of a fully transparent overdraft program and limits, account holders can resist turning to unregulated and often costly sources for cashing checks and paying their bills.

Consistent with helping account holders achieve and maintain financial stability, your overdraft program should provide:

  1. Complete transparency regarding fees and program procedures.
  2. Reasonable and well-communicated overdraft fees.
  3. Clearly established overdraft limits.
  4. Transaction clearing policies that avoid maximizing overdrafts and related fees by the clearing order.
  5. The ability to easily monitor excessive usage.
  6. Communication materials that outline alternative financial products that more appropriately fit the needs of excessive overdraft users.

By helping account holders integrate daily cash flow management skills with big-picture financial preparedness, you can provide a value-added service designed to retain account holders in a rapidly changing financial climate.


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