Do you feel an overdraft?

Open a checking account today and you’ll be handed a plastic card that lets you withdraw cash from ATM machines or make purchases by transferring money from your account to a merchant’s. You’ll be aware of these features because you’ve probably been using an ATM card for years. What you may not realize is that, in most cases, the bank has quietly signed you up for overdraft protection that kicks in automatically if you spend more than you have in your account. And you may not find out about this feature until you rack up hefty fees.

Banks have long offered various ways for customers to avoid bouncing a check, such as extending lines of credit or linking checking accounts to savings. Overdraft protection services pump funds automatically into an overdrawn account, up to a limit of a few hundred dollars. The fee averages $34 per transaction, which is less than the usual penalty for a bounced check.

As these services have migrated from checks to debit-card purchases, however, a new problem has emerged. Many consumers may expect that their debit cards will be rejected if their checking account runs out of money. But with overdraft protection, they won’t even know that their account is empty. They’ll continue using the card, incurring a $34 fee each time, regardless of how small the purchase is.

Those fees have become a multibillion-dollar revenue stream. The Center for Responsible Lending estimates that banks and credit unions collected nearly $24 billion last year from overdraft protection charges. By the center’s calculations, that’s more than $1 in fees for every $1 lent to consumers. Some may welcome the service, even when it arrives unbidden. But others won’t, especially if they find themselves paying hundreds of dollars in charges after a weekend’s worth of small transactions.

Federal regulators adopted a set of voluntary “best practices” for overdraft services in 2005, but an outpouring of complaints from consumers has prompted the Federal Reserve to consider a tougher response. It should include requirements that consumers be told about alternatives to overdraft protection and that they “opt in” to the service rather than having it applied automatically. They should also be notified before a fee is triggered so they’ll have the chance to cancel the transaction, which would force merchants to check for a bank’s authorization before approving the use of a debit card. Some retailers skip that step in order to speed customers through checkout lines. That practice encourages fraud, however, and it’s no reason to preserve the current system. Overdraft protection services are short-term loans, and no one should borrow money without knowing it.