5 Keys for a Successful Overdraft Program

Posted on Tue, Aug 19, 2014

There are no one-size fits all overdraft privilege programs. Each overdraft privilege program needs to be unique to your financial institution and provide your staff with proper training. Through reasonable fees, expectations and conservative overdraft limits, your financial institution can provide accountholders with a valuable customer service they appreciate.

1.     Customer Communication

From the start of a new account opening, your frontline can begin communicating with new accountholders about your overdraft privilege program. Through proper staff training, each team member should be able to educate accountholders on the details and benefits of your program.

Communicate with accountholders during key points:

  • Let accountholders know what they can expect now that they’ve chosen to opt-in to your overdraft program
  • Communicate at the time of their first overdraft
  • Communicate after each subsequent overdraft
  • Let accountholders know when they have brought their balance back into good standing
  • Let accountholders know if they have not brought their account balance back into good standing by the agreed-upon time frame

2.     Reasonable Fees

Set a reasonable fee that your accountholders are knowledgeable about upon their decision to opt-in to the program. If there is miscommunication, we encourage you to provide fee refunds when necessary. Financial institutions are discouraged from raising overdraft and non-sufficient fund fees.

3.     Reasonable Expectations

An overdraft privilege program is not a loan; it should be marketed as a safety net for emergencies only.  An accountholder should fully understand their financial institution’s overdraft privilege program prior to committing to the service. Adequate staff training can assist your accountholders in fully grasping the details of your program, while providing employees with information to support it.  

Your financial institution will not have 100 percent participation in your overdraft privilege program, but it’s important to identify those accountholders who could benefit from it and would value the program as a service to achieve a successful overdraft program.

4.     Conservative Overdraft Limits

Setting conservative limits for overdraft fees is important to your program because you want to preserve the spirit of overdraft privilege as a customer service. Accountholders who see an unlimited amount of overdraft fees in one day may feel that the program is no longer a benefit.  Whether your overdraft privilege program has a set number of fees or a total dollar amount, set conservative limits in order to maintain your accountholder relationship.

5.     Leadership Focus and Monitoring

Your financial institution’s board of directors should provide appropriate oversight of all programs, old and new. All levels of management should be informed about the overdraft privilege program and how it is a valuable customer service that benefits your financial institution.

It’s important to get all levels of management on board with your financial institution’s overdraft privilege program so that they can reaffirm to their frontline employees the importance of identifying accountholders who can benefit from the program. Management should also be able to identify the need for additional employee training, especially if they have a branch with high employee turnover. If your frontline employees don’t understand the benefits of the overdraft privilege program, neither will the accountholders with whom they communicate.

Ensure that your workforce is properly trained on your financial institution’s overdraft privilege program and provide your accountholders with a clear understanding of how your program can benefit them for a successful overdraft program. To learn how proper handling of overdraft privilege programs can benefit your bank or credit union, speak to one of our ODP experts at 713.868.3333. 

Tags: Overdraft Privilege, Pinnacle Overdraft program, overdraft program compliance, Overdraft Privilege Programs, ODP