Citibank (NYSE: C) and other firms offer overdraft protection because it’s a very profitable business. Banks can collect massive fees and interest when customers overdraft while using their overdraft protection services. It appears that for at least one customer, Citibank appears to be cancelling customer’s overdraft protection when they don’t make use of the service.
The consumerist received a letter from one of their readers indicating that Citibank would be cancelling the reader’s overdraft protection service because she had managed to avoid making any overdrafts since opening her accounts.
Here’s the letter that the consumerist received:
Over the weekend I got a notice that my line of credit had been closed effective 11/21/09, due to non-usage. When I called for an explanation, I was given the same line – that it was closed due to lack of use. I explained that the whole point of overdraft protection is that it is there on the rare occasion it is needed, but to no avail. I now no longer have the line of credit. It’s just ironic, since they were the ones who insisted on opening it for me. As careful as I am about overdrafts, I am now much less likely to use my Citi debit card, since I no longer have the reassurance of OD protection.”
Citibank hasn’t stated how many customers with balanced checkbooks that they are cancelling overdraft protection service for, but it appears that Citibank is hoping to cut its operational costs by cancelling the service for customers that do not make the company money.
