B of A eliminates overdraft fees to satisfy new Federal laws…
If you’re a customer of Bank of America you will no longer have to worry about spending more than you have in your account and getting penalized with overdraft fees. Starting in early August, Bank of America is eliminating the ability of customers to make purchases with their debit card, or withdraw money from ATMs, if there isn’t enough money in their bank account (new customers start on June 19). Many financial experts believe it’s the first of many changes banks will make before new overdraft fee regulations go into effect on July 1.
The new Federal Reserve law will ban banks from collecting these types of fees without getting permission from their customers first. Customers using an ATM to withdraw funds will agree to pay a $35 overdraft fee before the transaction is completed. Debit card purchases will also require authorization before an overdraft occurs. But Bank of America goes a step further by totally eliminating the ability of customers to make purchases if there isn’t enough money in the account, replacing the current terms of charging a fee for deficits over $10.
“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 Bank of America. “They’re doing this unknowingly, because they aren’t aware that they are about to overdraft.” With no way to notify customers that they’re going over their balance when they’re at the register, the bank decided to simply reject these transactions.
Bank of America will take a financial hit with the new policy. Overdraft fees generate over $1.77 billion annually for the banking industry; what share Bank of America earns is not available. The FDIC estimates that approximately 41% of those fees are from point-of-sale, 8% from ATM’s and the remainder are from bad checks and Internet payments. Nintey-three percent of these fees are paid by only 14% of consumers, sometimes referred to as serial overdrafters, making the new rules less likely to impact the average consumer.
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