With the Federal Reserve having recently come to the conclusion that the banks' policy of routinely allowing purchases or ATM withdrawals by customers, and then charging for them, spelled more harm than good, the banks will now need to seek the consent of the customers to continue with their `standard overdraft practices.'

With effect from Thursday, a new federal rule will come in place, which will essentially ban the banks and credit unions from automatically enrolling customers in the expensive overdraft-protection programs.

The rule - which will initially be applicable only to new customers; and expanded to current account holders from August 15 - will require the banks and credit institutions to seek the permission of the customers before charging overdraft fees for debit card or ATM transactions.

For all the customers giving their consent for the overdraft fees, the banks or credit unions will allow their transactions to go through, even in a situation when there is no money in the customers' accounts to cover the transaction amount. However, for the overdraft coverage extended to these customers, the institutions will charge a hefty fee of $35 "per item" for each overdraft purchase or withdrawal.

Meanwhile, for all the customers who decide to deny the permission to the institutions, neither will the debit card purchases go through nor will they be able to get money from an ATM.