Last year, Smithee reported that Bank of America was the first major bank to allow customers to opt out of overdraft protection and the associated fees. Those customers who opted out of overdraft protection would have their card rejected when attempting to make a purchase without the funds available.
Thanks to these changes as well as the limitation of four overdraft fees charged per day rather than ten, the bank lost out on $160 million in income in the last three months of 2009. Nevertheless, the bank will continue to make changes to comply with federal regulations.
Bank of American announced additional changes coming this summer, and I expect other banks will follow suit. On June 19 for new customers and in early August for existing customers, Bank of America will cease all overdraft protection on debit card purchases. After the policy change, no customer will be able to spend more than they have available in their account while using their debit card. The transaction will be declined.
The type of overdraft protection being eliminated is the type where the bank covers the funds in the short term and your checking account balance will head into negative territory. Customers will still be able to link their checking accounts to credit cards or savings accounts, so overdraft coverage in the form of a transfer from their own account will be available for a fee $10.
The bank-covered overdraft protection will continue to be available for checks and automated payments. Banks still see this as a convenience to the customers; no one wants their mortgage payment to bounce or be denied. At the ATM, if a customer attempts to withdraw more than the amount available, the machine will warn the user than a $35 fee will be charged if the withdrawal continues.
Bank of America is making it clear that it is looking to win points with customers with this move to eliminate certain overdraft fees. I have no concern about Bank of America’s ability — as well as the ability of any other big bank — to continue to find ways to charge unexpected and excessive fees. It’s a great reason to track your finances and keep your finances simple.