BofA: No More Overdraft Fees

Bank customers can get slapped with a $35 overdraft fee because the $3.00 latte they put on their debit card is more than they have in their account. What’s worse, those overdraft fees can pile up with each transaction they make as long as their account is in the red. That situation has drawn the attention of Washington lawmakers and has led to stiff new rules regarding overdraft fees, slated to go into effect later this year.

Bank of America has opted to beat the deadline and will eliminate overdraft fees for new customers in mid-June and for existing customers in August. The new policy doesn’t mean that bank customers can overdraw their account and not be charged a fee. What it does mean is that, if a customer doesn’t have enough cash in their account to cover a purchase, the transaction will be denied at the point of sale.

That could turn what seems like a good thing into a two-edged sword, say banking industry consultants. Consumers who suffer the inconvenience and embarrassment of having a small purchase denied at the check-out line because of insufficient funds may find themselves wishing for the overdraft fees to come back. Overdrawn Bank of America customers could still get cash from an ATM, but would be charged the overdraft fee. Also, the new government rules will allow banks to charge overdraft fees if the customer opts into the program.

The change is no small step for Bank of America or for the industry as a whole. Overdraft fees have supplied banks with almost $40 billion in annual revenue over the past few years. Although Bank of America declined to speculate on the amount of lost revenue involved in eliminating overdraft fees, banking analysts estimate that the move will cost the bank millions of dollars.