BofA Ends Overdraft Fees on Debit Cards

(AP)  Bank of America customers will soon be unable to spend more than they have in the accounts linked to their debit cards. It's a step that may become a common move ahead of new regulations limiting overdraft fees.

Rules set by the Federal Reserve that will ban banks from charging such fees, without first getting permission from the customer, are set to take effect July 1.

But Bank of America is going a step further than the regulations require. It will simply no longer allow debit card purchases to go through if there isn't enough money in the account.

For ATM transactions, customers who try to withdraw more than their balance will have to agree to pay a $35 overdraft fee before they can get the money.

"The majority of our customers who overdraw their account do so with everyday debit purchases," said Susan Faulkner, senior vice president of consumer banking for Charlotte, N.C.-based Bank of America. "They're doing this unknowingly, because they aren't aware that they are about to overdraft."

Since the bank doesn't have the ability to notify the customer when they're at the register and give them the chance to agree to a fee, it will simply reject such transactions.

Consumers have demonstrated a willingness to pay overdrafts for covering the mortgage and the car payment, said Greg McBride, who follows the banking industry for Bankrate.com. "But not if it's things like covering a latte and a scone."

The bank's new policy will kick in on June 19 for new accounts, and in early August for existing accounts. It will replace the bank's current terms, which allow overdrafts to go through but only charge a fee if the deficit is greater than $10.

Bank of America is the first big bank to announce such a change, but it likely won't be the last. That's because while the new rules will save consumers from surprising dings on their accounts, they will also cut deeply into the more than $1.77 billion annual revenue overdraft fees generate for the banking industry.

Faulkner would not estimate how much such fees pulled in for Bank of America in the past.

The Federal Deposit Insurance Corp. estimates about 41 percent of that total is from point-of-sale debit transactions. About 8 percent was from ATM transactions. The rest were from bad checks and online bill payments, which are not addressed in the regulation.

What's more, 93 percent of overdraft fees are generated by just 14 percent of customers.

Because most of the fees were paid by what Robert Meara, a banking analyst with the consultant Celent, called "serial overdrafters," the rules may not save the average consumer much money. In fact, because banks will look to make up that lost revenue, it may actually cost most individuals more.

"What this may do really is produce the unintended consequence of creating the demise of free checking," said Meara. Banks jumped into free checking in the last decade because of competition, but at the same time started allowing overdrafts that generated huge sums. If they can't charge those fees, it's likely they won't offer the free products anymore either.

Or, he suggested, consumers might start seeing deals advertised where free checking kicks in after a certain number of transactions, or if a customer has several accounts linked together.

"I think banks will use this as an opportunity to be creative and differentiate themselves in ways that was really hard to do when everybody had a free checking account," Meara said. "There's a way this can be a win-win for everybody, but in the short term I think it's going to be challenging for banks to make up for that lost revenue."

[ktdfox]

Screw banks. I refuse to use them, period. If someone has a problem with that and doesn't want to rent to me or sell me a car, well, they can sit and spin. Someone else will want my cash, and will give me what I want in exchange for it.

What they really need to outright ban is the re-ordering of transactions to turn one overdraft into multiple overdraft fees. If you overdraft once, you should be penalized once, not ten times.

They got this country into this mess with their predatory behavior, and they can bend over and take it while we get out of it. So these fat cats who run the banks get to buy their useless trophy wife a Mercedes Benz instead of a Bugatti this year. Boo-hoo-hoo. Someone get me the a violin.

[tmittelstaed]

"Screw banks. I refuse to use them, period"

Not everyone wants live in their mommies basement all their lives. Lots of people like to buy a home which takes a mortgage.

You might consider that interest rates on home mortgages are in the 4's to 5's nowadays. That's lower than the inflation of home values over the last decade, even accounting for the housing bubble, and it's likely to be lower than the inflation of home values over the next decade. What this means is that if you buy a house now and finance it, as long as the equity increases faster than 5% apr you will end up 30 years from now with more money than if you had just stuck your money under your mattress until you had saved up enough to buy your home. That is why people get home mortgages, Sherlock.

[myopinionpal]

Why should anyone need overdraft protection? balance your checkbook and you will know if you have enough money to buy something, if you don't have the money in your account then wait until you do.

[WitchBroom]

Why you ought to be ashamed of yourself because that sort of thinking is so reasonable, wise and responsible that it's un-American these days. :sarcasm:

I wholeheartedly agree with you.

[taxchurches]

How interesting. If it was possible all along to prevent people from spending what they didn't have, why didn't they do it before? Answer: so they could charge $35 a pop, every time anybody when over, even by a penny. Greed. Profit. Callousness. And don't forget the charming practice of calculating debits BEFORE deposits -- another way of gouging those who dance precariously on the brink from paycheck to paycheck.

zippiez's interpretation is probably right. Count on this legislation making your banks even more unscrupulous, not less.

[WitchBroom]

Persons who are financially disciplined should have few problems with the new policy, but will the ones with bad financial habits ever learn? One wonders if this is more of a psychological move than anything else. On the surface it may look and sound good, but in the end it may be an attempt to game consumers by steering them to use or acquire high rate credit cards which ordinarily results in huge bank profits in the long run - more so than the fees from debit cards. Doing so essentially allow the banks to achieve the same or better results with one product (credit cards) rather than two (debit cards and credit cards). Typically it's simpler to manage one product rather than two.

[observer2020]

Bank of America had a deposit of a large check for 5 days. Why they have to do that now in the day of computers--a transaction should take 1 day at the most but that's neither here nor there as they love playing with our money. Anyway, at the END of the 5th day, I used my debit card twice. Bank of America in their infinite wisdom, posted the debits BEFORE posting my check that they had for now 6 days and was finally posted at the beginning of their day. I ended up DONATING to the CEOs FUN FUND. By doing the 1-day old debits before the 6-day old deposit it put me in the hole by $.27 and it cost me $70 for this. I hate this bank, it wasn't my choice as they bought out the bank I signed up with, and I will dump it as soon as I find another that is convenient to me. They did not give me back the money, even though I made more than numerous phone calls and visits. Jerks! Today was even better. My mother passed away a year and a half ago. My brother is executor. When he was visiting for her funeral, he cleaned out the safety deposit box. Being that my Mom and I both were at Bank of America and we have the same last names and the same address...they went into MY account and took $42.10 for "Past Due Safety Deposit Box Rent." I have nothing to do with her accounts nor did I have anything to do with the safety deposit box. But they took the money and as of right now, they have NO intention on giving me my money back. Isn't that stealing? They are using my account information to settle something that I have nothing to do with? They should be dealing with my brother, the executor, and not me. What are your feelings? I'd like to hear them.

[jt92202]

Chase did the same thing, kinda. My kids both under 25 have accounts with Chase, I had a account that I would use to move money into their accounts so they wouldn't overdraft (My name was on both of their accounts because when they were 14 when I opened the accounts my name had to be on them). My daughter overdrew anyways, I went to the bank at the beginning of june 09 and said "What do I need to to get this cleared up and cancel the account". The teller said 76.00 or so and I will close the account in the morning after your check clears. I thought we were all done but no some other charges came through and the account didn't get canceled. They did not contact me. My daughter got a letter dated 6-28-09 stating for her to contact them and they could get this fixed. On 7-1-09 Chase took all the money out of my account as well as my sons to pay her overdraft fees. My son had nothing to do with her account but because My name was on the account they said they could recoup from where ever they felt like. I almost got thrown out of the bank and they almost called 911 because I was HOT! If they would have contacted ME I would have taken care of it the day the teller realized he couldn't cancel her account, he had my info but instead they did nothing until the end of June. My daughter may have gotten a letter but she didn't tell me but the point is why do they have the right to go into other accounts just because my name was on them. My son's was clearly not my account, he was the primary and I was just a signer! By the way this was withing the same year that Chase took over WAMU, I was with WAMU for 20 years!!!

Banks suck, I went to BECU, credit unions are much better than big banks.

[Zann-Zel]

They stole from you! What to do about it I don't know. I fought with my last bank till I was blue in the face, then I gave up and changed banks.

[BlueDogDem]

Don't spend more than what you have?

Hmm....what a NOVEL idea!! What the Bank of America is doing should be part of the new federal financial regulations!

[zippiez]

"I think banks will use this as an opportunity to be creative and differentiate themselves in ways that was really hard to do when everybody had a free checking account," Meara said. "There's a way this can be a win-win for everybody, but in the short term I think it's going to be challenging for banks to make up for that lost revenue."
---------
What nice corporate executive way of saying "We'll find a way to screw you over and over and over. It will take government many decades to change our money gouging ways, again. Ha-ha-ha-ha!"

[pragmatist1]

Good for BofA doing something about dropping the fee, while at the same time denying the transaction for insufficient funds. No one should have ever been allowed to extend beyond what they didn't have available, including checking account balances or credit card limits, regardless of paying a penalty. Maybe now the undisciplined will learn not to extend beyond their balances. They might even be forced into balancing their check book. Wow, what a concept!

[presjfk]

Good for BofA? Have you read the article? BofA is doing this preemptively because they will be required to do so by law very soon.

More shoddy journalism from CBS. The title of the article couldn't be more deceptive.

[jtdev1]

OH NO!

The Profits!


What about the PROFITS?????

[ajvw]

"For ATM transactions, customers who try to withdraw more than their balance will have to agree to pay a $35 overdraft fee before they can get the money."

and then they'll cry, "I didn't know"