Bank of American finally does the right thing on overdrafts
By Consumers Union on Wednesday, March 10th, 2010
Bank Of America announced Tuesday that it will end overdraft charges on debit purchases. This means that the bank will not be soliciting consumers to opt-in to overdraft, which will be required under law starting summer 2010.
Why such a huge change that will cost the bank millions? Bank of America is finally admitting what we’ve been telling them for years. That consumers don’t want banks to automatically cover their debit card swipes when there’s not enough money in their account. From the BoA press release:
“Our customers have been clear that they want to know if a purchase is going to overdraw their account,” said Susan Faulkner, Deposits and Card Product executive. “Our solution is simple, clear and helps customers control their finances by reducing the possibility of over-extending themselves at the point of sale with a debit card.”
These changes are due to go into effect on June 19th for new customers and early August for existing customers.
Other interesting aspects of the new BoA policy:
* Customers can link their checking account to a savings or other account through Overdraft Protection which will cost a fee.
* The policy does not apply to ATMs, but the bank says that at Bank of America ATMs consumers will be alerted that the transaction might cause an overdraft and result in a fee.
* The policy also does not apply to check or automatic payments, although the bank says it will be offering consumers the ability to opt-out of having any transaction covered when there’s not enough money in the account.
There has been public rage over consumers continuing to get ripped off after banks received huge bailouts and continued years of questionable and unfair practices. Consumers Union has received hundreds upon hundreds of stories from consumers all over the country who have squeezed to death by overdraft charges.
Take for example, Rachel:
Rachel is a married mother of three, who finds it difficult to manage her household when overdraft fees pile up. Throughout 2008, she paid $1000 in overdraft fees – and in October alone she paid almost $500. By the end of the first week in October, when she realized she had overdrawn her account, Rachel found 7 overdraft charges for debit card transactions. Through the following week, Rachel also had overdrawn on five more debit card transactions because she needed to use her card and simply could not catch up on the overdraft fees.
All of the purchases which caused Rachel’s account to overdraft were for less than $20 each, and at least half of these were under $10. The smallest of these charges was for a $1 beverage purchased at a gas station; however, all of these transactions were penalized for a $35 fee. In describing her bank’s overdraft policy, Rachel explained, “They clear the largest amounts first because they want to charge the [$35] fee on the $1 purchase.” After working with the Better Business Bureau, Rachel was able to get a few of her overdraft charges reversed but the bank refused to refund any more.
The overdraft fees deducted from her account took away from the grocery money Rachel uses to feed her children – she describes: “When you’re taking $300 from us in two weeks, we get behind on other expenses. It literally took us two months to catch up.” Although she would rather be declined on small purchases, Rachel would like recurring payments, such as her car payments, to be processed even in the event of an overdraft – she explained, “They should give us an option – if it was something like a car payment I would probably want [the bank] to put the payment through, but not the little debit card purchases.”