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Overdrafts and your checking account

You may already have heard about recent legislation aimed at giving consumers enhanced flexibility and choice regarding certain overdraft transactions they make with their checking account.

These legislative changes are now about to take effect, and if you have a personal checking account at almost any bank, they will require your participation — even if you’ve never had an overdraft fee assessed against your account.

So what are the new rules? Starting July 1, 2010, all financial institutions — including First Tennessee — must have your permission to cover any everyday debit card or ATM transactions that you initiate when your account does not have sufficient funds, if the transaction is subject to an overdraft fee. The dates may vary for other banks, but all must comply with this rule by Aug. 15, 2010.

These could be simple transactions like running to the store for a gallon of milk, getting gas or withdrawing money to go to the movies. Or they could be any other one-time purchase made with your debit card. An important distinction to make, however, is that any recurring debits you have set up with your debit card are not affected by these rules. Nor are paper check transactions, automatic payments from your checking account, or other types of withdrawals.

In the past, most financial institutions, when covering overdraft transactions at their discretion, have then assessed an overdraft fee. Now, institutions like First Tennessee will need to have your authorization to cover everyday debit card charges or ATM transactions in excess of the funds you have available in your account.

So that we clearly understand the wishes of our customers, each First Tennessee checking customer recently was mailed an opt-in form in the mail. Customers will need to decide whether they want these types of transactions to be paid in an overdraft situation, or whether they want us to decline their transactions at the ATM or the point of sale.

If you are a First Tennessee checking customer, you can change your selection at any time (changes after July 1 will take effect after five business days).

However, if we do not receive your decision by July 1, you will be automatically opted out, and everyday debit card and ATM transactions will be declined if your account does not have sufficient funds. For your convenience, you will be able to give us your decision by mail, phone, on our Web site or at a financial center. The letter and decision form you will receive will include more details on how to reply.

The most important thing to keep in mind is that your decision must be based on your own banking habits and preferences. Some people prefer a little more flexibility with their account and the option of having a transaction go through in tight situations. Some would rather a charge be declined so they can immediately deal with it, while avoiding overdraft fees.

Either way, the choice is yours and you have the freedom to manage your account the way that meets your needs.

If you would like to learn more about these new rules or read some helpful suggestions for avoiding overdrafts, visit us at

Tracey Courtney is vice president and trust officer for First Tennessee and can be reached at 865-971-2136.


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