Cutting Edge: Bank of America Ends Overdraft Fees

Customers may find relief in new policy nixing the extra charges

What a relief! Bank of America customers can say sayonara to overdraft fees. The folks over at Wallet Pop reported the news late Tuesday as the colossal financial institution announced an end to letting customers spend more money than they had in their accounts.

BOA’s new debit card policy will kick in mid-June for new customers and August for existing cardholders. So instead of being charged $40 for that $6.99 BLT you thought you could cover, you simply won’t be able to make the purchase –rejected on site! Hey, it beats having to come up with extra cash ‘cause you wanted a sandwich.

Banks raked in $38.5 billion from overdraft and insufficient fund fees in 2009.  Debit purchases account for roughly 60% of BOA’s overdrafts.

“What our customers kept telling me is ‘just don’t let me spend money that I don’t have,” said Susan Faulkner, the bank’s deposit and card product executive, who says the change in policy is part of a broader push to build trust among BOA customers. “We wanted to help them avoid those unexpected overdraft fees.”

In the months leading up to the implementation of the White House’s CARD Act, many banks became unscrupulous, hiking fees and lowering credit limits. Perhaps our bailed out brethren on Wall St. have finally had a change of heart? Only time will tell.

Either way, the policy is long overdue. Automatically giving customers overdraft protection, where purchases are cleared while they continue to spend and rack up exorbitant fees, made no sense to anyone but the banks. Sure, as consumers we must also do our part and keep track of our spending, but how hard is it to decline a purchase when funds are not available? This move will undoubtedly put money back into consumers’ pockets, and the sheer embarrassment of having a purchase declined at a grocery store or on a weekend shopping spree is enough to keep even the most haphazard spenders on their toes.

What’s your opinion? Do you think other banks will follow suit? Do you think the absence of this revenue stream means additional fees elsewhere?

Renita Burns is a staff writer at Black Enterprise.

ACROSS THE WEB
  • http://www.dmwbooks.com Darlene M. Washington

    I think this is really, really great. Except they should allow the first overdraft transaction only and charge for that one transaction only. And then that’s that! The customer is alerted, they know they’re overdrawn and will incur a fee for only the ONE transaction which overdrew the account.

  • http://nesheaholic.blogspot.com LaNeshe

    It is about time they came around and did something for their customers.

  • Eric

    Great News!!!!

    Finally we have someone that cares about the abuse of these ridiculous overdraft fees that banks have been charging the consumer for years. Although we need to manage our money better it don’t mean that these financial institutions should take advantage of the consumer.

    Thanks

    Renita

  • Janet

    This is great. Sometimes people make honest mistakes in their accounts. They forget about debit purchases coming out automatic and before it’s all said and done multiple items have bounced and multiple charges have occurred. One good emabarrising moment at the check out will help customers become better record keepers. There is nothing worse than a 40.00 fee for a 2.00 transaction.

  • http://www.blackenterprise.com yvonne

    Finally a bank has a conquence. Maybe that billion dollars worth of overdraft fees can help to get us all out of horrendous debt. We all need to do the right things towards each other. Hopefully all the other banking giants will follow suit when they see that BOA is doing the right thing. I intend to go back to BOA if this is truly the case. Having to be charged $37 for a $2 overdraft fee is a sin before almighty God. I promise I will become a better bookkeeper!

  • Robyn

    Of all the fees I had accumulated when the bank was unclearing checks that were already presented and cleared should have stayed cleared. If a check come through and their are no monies available teturn the check instead of unclearing the last check to cover, because the system think it is more imortant. In retrpspect I want every fee you took from me in the thousands of dollars returned,. I think this information should be distributed to every victim who was practically destroyed by these fees.

  • JSO

    I actually stopped using my debit card because of how easy it was to overspend by missing a couple of receipts when balancing my account.

    I also left Bank of America because their system would “help you out” by allowing the largest charge to come out first in any given day. This meant that any smaller charges that would hit the same day would incur $40 overdraft fees one by one. The end result was that my miscalculating by $25 dollars when balancing an account, could end up costing me over $100 in fees.

    They should have made this change long ago.

  • http://blackenterprise.com Alfred Edmond, Jr.

    I just got a letter from Chase announcing that they will also discontinue overdraft “protection” later this year, unless you opt in to continue the service. Something tells me that all of the major banks will be following suit.

  • Renita Burns

    It is about time the banks started doing something. @Alfred, i’m glad to see other banks are following suit. These institutions receive the bailout funds but take advantage of customers. My interest rate for one of my credit cards rose to 13.9% even though i’d never been late and barely carried a balance. I just hope they don’t try to make up for the funds in some other way.

  • James

    I think this is really great. I would rather be embarrassed for not being able to make a $2.50 purchase than to have 20 items on hold that the bank decides to run when because they let me make that 2.50 purchase which leaves me to $40 x 21. It’s like they put it all on hold and wait for you to make that one small amount purchase and then run everything from the biggest amount to the smallest right after.

  • Ben

    This is really great but do not forget about your automated monthly debits for things like Blockbuster online and such. If you do not have the funds in there to cover them, BOA treats it like a check and hits you with a NSF returned item fee of thirty five dollars. Just happened to me twice. I forgot to put them on hold.

  • Jen Jae

    This only applies to personal accounts. I have a business account and just got hit with a bunch of overdraft fees for $4.00, $29, $12.50, etc. that were all charged a $35 fee instead of declined. This practice, in my opinion, could be likened to customer entrapment.
    As was stated above, we are certainly responsible for our own finances; however, I check my account daily and usually when an ACH is going to come through, it will show as processing the day before. This time it didn’t and then when it hit, the account went negative.
    I have never heard of a debit card continuing to approve charges after you are overdrawn. This is definitely something that bank customers, or at the very least, business account holders, need to be notified explicitly about. This practice t is very deceptive. Tell your customers at the time the account is opened and a card is requested!!! I think this is something that could warrant a class action lawsuit for any bank that still uses this deceptive practice. I’ve been banking with various banks for years and have NEVER had a charge go through on a DEBIT card if the money wasn’t there. This only would apply to credit cards and they only charge you an over-limit-fee ONE time, not for each transaction. This is just plain wrong and I believe it should be illegal. Who’s with me???

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