It’s a happier day for consumers with checking accounts now that the Fed will be cracking down on banks and their grossly exaggerated overdraft fees.

Last Thursday, the Federal Reserve ordered banks to charge no overdraft fees without a pre-arranged, written contract establishing the consent of the consumer.

Overdraft fees range from $10 to $38, with the median rate at $27 dollars, according to a 2008 study by the Federal Deposit Insurance Corp. Fees are often larger than the customer’s own purchase.

During the past few years, as banks have seen tougher times, they have drastically hiked up all fees, but especially overdraft fees, to boost dwindling profits. Banks like to claim they cover overdrafts so consumers will not be inconvenienced by temporarily insufficient funds or placed in uncomfortable situations when they cannot complete a purchase at.

But really, banks take advantage of consumers and the opportunity to charge outrageous rates that cost consumers approximately $30 billion per year, according to The New York Times.

Bankrate.com, a Web site that collects and organizes rate information from thousands of American banks, reports that “most customers aren’t informed of the overdraft until after the ATM or point-of-sale transaction has taken place.”

Yes, we consumers should be held responsible for our actions, and we must know how much money is in our accounts and in our budgets. But we should not have to borrow money or go into debt without our knowledge and our consent.

Overdraft fees can put lower income customers into debt, which is stressful and not easily paid off. Automatic overdrafts also occur most frequently among young adults between the ages of 18 and 25, according to the FDIC.

Banks may also process charges from highest to lowest dollar amount, instead of in chronological order, so that they can charge as many fees as possible. According to The New York Times, “because consumers use debit cards far more often than credit cards, a cascade of fees can be set off quickly, often for people who are least able to afford it.”

So it was about time someone said no to the banks. Luckily, in response to rising anger and pressure to change these unfair bank practices, the Fed has finally implemented this new rule, which says banks may not automatically sign people up for overdraft protection, as they have often been doing without the customer’s explicit knowledge.

The new rule, which will kick in next summer, will greatly help to protect consumers, but it is just the beginning.

For one, the rule does not go far enough to include all transactions.

The rule covers debit card transactions and ATM withdrawals but not checks or automatic withdrawals such as to utility companies.

As Sen. Christopher J. Dodd, D-Conn., has rightly said, “We still need to stop the excessive fees, repeated charges, lax notification and processing manipulation that have become standard in these so-called overdraft protection programs.”

Legislation has been introduced in Congress that would limit the number of bank overdrafts that could be charged per month and lower the rates, but it has not yet been passed. We’re beginning to put a limit on unfair bank practices, but there is still a long way to go.

Reach Hannah at hwasserm@asu.edu.