Bank of America to End Overdraft Fees on Debit Purchases

[angelicwoman]

Source: New York Times

In a move that could bring an end to the $40 cup of coffee, Bank of America said on Tuesday that it was doing away with overdraft fees on purchases made with debit cards, a decision that could cost the bank tens of millions a year in revenue and put pressure on other banks to do the same.

Bank officials said that effective this summer, customers who try to make purchases with their debit cards without enough money in their checking accounts will simply be declined. Debit purchases account for roughly 60 percent of overdrafts at Bank of America, the nation’s largest issuer of debit cards.

Banks are bracing for a new federal rule that will require them to get permission from account holders before providing overdraft services for debit purchases and A.T.M. withdrawals. That change was already expected to wipe out billions of dollars in overdraft revenue for the banks.

“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 said the overdraft changes were part of a broader push to build trust among its customers. “We wanted to help them avoid those unexpected overdraft fees.”

Read more: http://www.nytimes.com/2010/03/10/your-money/credit-and-debit-cards/10overdraft.html?hp

[CatWoman]

1. OK

what's the catch?

[roguevalley]

15. Darn. I was skimming and I read Bank of America to end.

[NashVegas]

21. Let the Screaming Commence

who try to make purchases with their debit cards without enough money in their checking accounts will simply be declined.

[Threedifferentones]

48. The catch is that new federal rule the article mentions

Bank of America is doing this because they will have to soon anyway, and they see a way to gain customers by doing it before it is required and before competitors do it. From their perspective, I'd say it's rather like trying to turn the proverbial lemons into lemonade.

[CoffeeCat]

2. Didn't they just announce a 300 percent increase...

...in profits?

Maybe they're willing to lessen the gouging just a bit, since
they're making some serious coin.

[FBaggins]

6. I doubt it. They're still losing money every quarter

Last I checked, they weren't expected to turn a profit until the second or third quarter. I think that last quarter saw a 100%+ increase in their quarterly loss.

But "300%" wouldn't be enough to go on anyway. If they went from making $1/share a few years ago to $.03 next quarter... they could see a 300% increase the following quarter and still have it be a pretty bad number.

[FreakinDJ]

3. But but but .... Rush LimpBalls said they pass on the New Fees

that Obama proposed on Banks to the consumer

This can't be true - Rush said so.....

[notadmblnd]

4. They're not doing this out of the kindness of their hearts

it was in the consumer bill that was passed.

[FBaggins]

7. Yes and no.

The bill forces banks to give customers a choice on whether they prefer to "opt in" and have overdrafts available (and pay a fee) or make certain overdrafts less possible (and avoid the fees, but potentially have other problems).

It may simply be that they decided that managing the program was more trouble than it was worth (they would need to work with millions of customers and document - and manage - who had "opted in or out")

[high density]

9. The technology also probably isn't there

I seem to recall that one of the proposals said the use of overdraft protection on a debit card would require a prompt at the POS terminal asking the customer if they'd like to pay the overdraft charges for the transaction to go through. Implementing this would probably be difficult, if not impossible, with the current payment systems in place. Denying the transaction is obviously already a feature built into the system.

[FBaggins]

11. I think it could GET there in time for July

but there's obviously an expense... then there's training (this isn't nearly as simple as it appears to some)... then implementation and explaining how things work to the customers... plus forms and programing for all the forms(etc etc etc)

This has the added advantage of forcing some competitors to follow suit - possibly AFTER they have already spent some of that time/money.

[SOS]

58. The consumer bill did not deal with this

The pathetic, boot-licking, Wall Street lackeys (aka the US Senate) did not have the guts to include the opt-out.
The new rule was issued by the Federal Reserve.

[dkf]

5. Good. Maybe people will carry cash too just in case they get declined.

[CBGLuthier]

16. Or gasp, maybe even track their spending and balances

Amazes me how slack some are with all the tools available today. I check my accounts online several times a day.

[pipoman]

49. Several times a day?

Wow, I wish I had enough money (or time) to justify that..

edit..I do agree that online banking has changed and simplified keeping track of accounts no matter how little I have..;)

[high density]

8. Coming this summer to a local TV news broadcast near you...

"I was stranded in the desert and really needed to buy some gas and water at the only 7/11 in 500 miles. It was a life or death situation! But those evil people at Bank of America didn't let my debit card purchase go through because I had no money in my account! Before it would go work, but when I needed it the most, my overdraft protection was gone!"

I'm rather surprised by this change. Most banks will not want to forfeit this revenue. I'm sure they will dream up some other way to extract money out of people.

[WriteDown]

19. You absolutely nailed it!

They'll be stories of people going without essentials and lawsuits being filed.

[Skink]

10. In another bold move Bank America to start paying interest on savings accounts.

[Still Blue in PDX]

12. What is this savings account of which you speak?

Oh yeah, I remember.

[grasswire]

13. but they have a new revenue stream

I protested the nearly $300 in overdraft penalties that ensued in just 24 hours from an $11 overdraft. They would not drop the penalties, saying that they were not overdraft protection but due to "holds" retailers had put on a succession of small purchases. So I saw then how banks will make up for those penalties.

Move your money out of BofA.

Pirates.

Look up Clossen v. Bank of America et. al.

[LaPera]

14. Move your money might be working....Move your money

to local community banks & credit unions...it helps and it's a start, to stop these "too big to fail" banks that are sucking us dry.

Move your money and help your community create more local jobs.

[CBGLuthier]

17. Chase is taking a different approach

They are smooth talking about how we have to call them and tell them we want this valuable service or otherwise, gosh darn it, they won't be able to "help" us.

Fucking thieving banks.

[Endangered Specie]

18. Fuck a bank, use a credit union...

They tend to treat you like an actual human.

[4_TN_TITANS]

20. My local bank has done this for years...

that's why I haven't had paper checks in years. It's also why I'm confident in my 14 yr. old daughter having her own debit card. Other banks have been practicing fair and responsible banking long before BoA

[kpete]

22. Bank of America to End Most Overdraft Fees

Source: New York Times

Bank of America to End Most Overdraft Fees
By ANDREW MARTIN

In a move that could bring an end to the $40 cup of coffee, Bank of America said on Tuesday that it was doing away with overdraft fees on purchases made with debit cards, a decision that could cost the bank tens of millions a year in revenue and put pressure on other banks to do the same.

Bank officials said that effective this summer, customers who try to make purchases with their debit cards without enough money in their checking accounts will simply be declined. Debit purchases account for roughly 60 percent of overdrafts at Bank of America, the nation�s largest issuer of debit cards.

Banks are bracing for a new federal rule that will require them to get permission from account holders before providing overdraft services for debit purchases and A.T.M. withdrawals. That change was already expected to wipe out billions of dollars in overdraft revenue for the banks.

Read more: http://www.nytimes.com/2010/03/10/your-money/credit-and-debit-cards/10overdraft.html?partner=rss&emc=rss

[hatrack]

23. Coming soon - "Account Access Fees"

:eyes:

[Frosty cupcake]

40. This isn't really news

BoA is only announcing what the new law will force them to do anyway. Note they announce the change will take place this summer--just when the new law requiring this will take effect.

I never unrec here, but I did this one because it's a bogus "story" that makes BoA to appear consumer-friendly when it's really not.

[FBaggins]

43. Yes it is.

The new law does NOT require them to do this. It requires them to give customers a choice re: whether to automatically reject certain overdrafts (and not charge a fee) or consider paying the overdraft (and charging a fee). Customers can "opt in" or "opt out" of various options (with "opt out" being the default for many if there don't proactively decide otherwise).

This is basically a decision to force everyone in to an "opt out" option.

[no limit]

24. Isnt that what the new law does? Or does that only apply to credit cards?

[Turbineguy]

25. And the World did not end

the economy did not collapse.

Maybe, just maybe, the wizards who think this stuff up are beginning to figure out that "Fuck the Customer" is not a sound, long term business model.

Even as fucked up as Washington Mutual was, I managed to get them to decline over-limit purchases on a debit card a few years ago. It took some effort, many phone calls but I finally got it to stop.

[wtmusic]

26. $35 a pop

It was my bad (forgot to make a deposit) but in two days time I had rung up over $200 in fees.

Of course, they're in no hurry to let you know - they wait a few days to send out the notice that you're overdrawn.

Done with BofA.

[Steerpike]

27. Well

It's a good thing they raised their credit card interest rates on most customers to near or abouts 29%...

[napi21]

28. One big reason for OD's on debit cards is gas stations, motels,

rental car co's & I'm not sure what other retailers put a hold or block on more of your funds than what you actually spent. I can't recall how much higher the hold is and I believe it varies from retailer to retailer, but many people operate so close to their balance, if they don't realize that one retailer put a hold on say $20.00 when they only bought $5.00 of gas, they OD the account and don't even realize it! That's one reason I've never used a debit card & won't! If you don't know about this process or don't understand how it works, please read the entire article at the link below.

When you use a credit or debit card to check into a hotel or rent a car, the clerk usually contacts the company that issued your card to give an estimated total. If the transaction is approved, your available credit (credit card) or the balance in your bank account (debit card) is reduced by this amount. That's a "block." Some companies also call this placing a "hold" on those amounts.

Here's how it works: Suppose you use a credit or debit card when you check into a $100-a-night hotel for five nights. At least $500 would likely be blocked. In addition, hotels and rental car companies often add anticipated charges for "incidentals" like food, beverages, or gasoline to the blocked amount. These incidental amounts can vary widely among merchants.

If you pay your bill with the same card you used when you checked in, the final charge on your credit card, or final amount on your debit card, probably will replace the block in a day or two. However, if you pay your bill with a different card, or with cash or a check, the company that issued the card you used at check-in might hold the block for up to 15 days after you've checked out. That's because they weren't notified of the final payment and didn't know you paid another way.

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre11.shtm

[rfranklin]

29. But they can debit your account in seconds...

Funny how it always works to their advantage.

[SOS]

52. They sure can

I deposited a $400 check issued by a state government for services rendered.
Two days later I used my debit card.
Got 5x $35 fees = $175
My check remained "uncollected", but the fees were there within minutes.

I look forward to August 15th, when I can tell that f#cking bank manager to get this sickening scam off my account.

[MessiahRp]

36. Yep one of the two biggest scams out there to collect fees...

1. Put a new charge in pending and let it sit there even if it's not going to go through (this happens a lot with car rentals/hotel stays, etc) then any real charges that come into the account... if the money is pending they treat it as if it is gone (even though it is not) and ding you for OD fees on it. I've had this where a pending charge that I wasn't expecting hit and it ate up all the money in my account while 8 charges that came through now had no funds... 8 different OD fees and I could only argue the bank down to removing half. It's bullshit.

2. The other major scam that needs to be fixed is processing order. Banks tend to use this nifty little scam a lot. Banks try to pretend that in most cases they won't pay out OD items but in my experience they almost always do. However they use that little excuse as an explanation of a way they scam you into a ton of fees.

So here's the example. Say you have $900 in your bank account. But say you thought you had more and goofed up your accounting. It happens to everyone right? No big deal.

Well say your checks were $800 for rent and Five $50 checks for other things (Groceries, whatever)...

And say they all hit the account on the same day.

The banks automatically put through the largest check first, claiming that they want to make sure your biggest purchase, rent or mortgage gets paid... again trying to pretend they don't just pay these out usually.

So $800 hits, two $50 checks hit... you're now at your $900. The next three checks all bounce... so instead of just being $150 short, you've amassed three $35 fees for another $105 total.

Now what they should do is try to process as many of the checks as they can with the amount of money you have in your account...

Five $50 checks = $250... then the $800 rent check hits...

So your account is in the negative $150 plus just one OD fee of $35. Easier to get out of the red with just one fee to pay off.

And banks will argue these fees to the bitter end and defend their processing order methods because it's a hidden cash cow. It allows them to ding people for all the little checks they write and nobody thinks the wiser.

Say the person wrote a bunch of small checks and was only like $30 over...

Well if they made a bunch of smaller charges (McDonalds, the Post Office, a quick pack of gum at the gas station, etc).. that $30 too much that they charged can quickly turn into $350 in fees.

It's a total fucking scam. And I have never seen anyone address it.

Rp

[ima_sinnic]

51. I have bought gas in various states between Florida & Maine w/a debit card

for at least 10 years (probably more like 15) and have never had a hold put on it.

The only holds I had were when renting a car and for a couple of hotels. When I returned the car, the hold was lifted, same with the hotels. When I checked out and the bill was finalized, the hold was lifted.

I never carry cash anymore but use my debit card for just about everything, and have never had problems. Of course, I check my balance online all the time, like sometimes more than once a day.

[Deep13]

30. Bank customers to say, "Too little, too late." nt

[Steerpike]

31. Good Morning

Banks have become predatory institutions that are geared to cripple you over time and drain your blood over the course of years.

[pattmarty]

34. HAVE become?????????? Fuck, when I was 13 yo I knew.................

........the "banks & insurance companies" were blood sucking bandits. AND, I was 13 in 1960.

[Steerpike]

55. Good Morning

You were definately a man ahead of his time..a visionary! I commend you for your foresight. I was for many years naive and ripe in my innocance.

[dipsydoodle]

32. Is there something wrong with the concept

If you ain't got it don't spend it.

[Steerpike]

33. I've heard so many republicans say that very same thing!

I say...Is there anything wrong with keepimg the interest rate of a card at the same level as when you first got it?

Of course poor people have always had the problem of having to spend money they don't have on car repairs or hospital bills...or food...

But, you know what corporatists say, "If God had not meant them to be sheared, he would not have made them sheep."

[dipsydoodle]

42. Are you saying that

your debit cards over there are interest bearing ? That is the subject here : debit cards not credit cards.

[Steerpike]

54. Oh Dear aren't we the little liight in the dark for Banks

Yes, I can borrow on my Debit Card/Checking account...the interest is 10 %...And my Debit card and Credit card are linked through overdraft protection.

Sorry to complain about the predatory banking system...so tell me..what does a Brit care about American Banks and how American feel about them?

[Gormy Cuss]

35. see post #6

Sometimes it ain't a matter of not having it, it's a matter of not having access to it because of holds.

[Steerpike]

37. they have also the used the technique of floating fees...

You think your bank fees are inflicted on the 17 of the month. So you pay your bills and buy some food thinking you get paid on the 15 so no problem...so the bank debits your accounts on the 14th instead...ha ha! fooled your ass! And banks have developed many predatory practices to take your money whenever possible. They do have a responsibility to turn a higher profit every year. And there is only one way to do that...

[dipsydoodle]

46. I guess your banks

differ from ours in the UK.

[Book Lover]

41. No. Would you also, though, agree there is something wrong with

a bank saying, "Yeah, you got it" and then *later* saying, "Oh no, you didn't have it; here's our charge for letting you have it, even though we told you you did in the first place." ?

[SOS]

56. IS there something wrong with the concept of opting out?

If I ain't got it, decline my card.

As of August 15th that's the law.
No more overdraft fees.
Problem solved.

[nightrain]

38. good, but they'll probably make up the revenue loss somewhere else...

BOA, Chase, etc should be broken up.

[sandyj999]

39. Won't Affect me I pulled all my money out of there yesterday.

And put it into a community credit union. And when the charming bank associate asked my reason it was this. "In my life if you don't do your job you get dismissed. B ob A needed a bailout due to poor management. It appears due to the hefty bonuses they received they are being awarded for "not" doing their job. Therefore I am breaking all association with this bank." I had the distinct feeling this wasn't the first time she had heard this reason. And I did the happy dance all the way to the credit union with my cashiers checks! :)

[Socal31]

44. I'm not 85 years old, so I dont write checks.

But if I did, I would still want them to clear and get charged an OD. Usually the embarassment/penalty/possible criminial action from the retailer is worse if you bounce a check.

[ima_sinnic]

50. so you pay people like, say, a handyman, plumber, or carpenter in cash?

whooptie-ding-dong for you. aren't you just the bad ass.
some of us actually pay people to do things who don't take credit cards, and we don't keep cash around.

[Gormy Cuss]

53. A debit card is a check , and overdraft protection will still be a product offered by most banks.

The difference is you will need to make the conscious choice to participate, just like in the old days. Overdraft lines of credit or overdrafts to a linked savings accounts have been around for years. These accounts typically had no transaction fees (but in the case of an overdraft line of credit, charge high interest daily on the balance.

The so-called "overdraft protection," where banks charge heavy transaction fees for even tiny overdrafts, has been an automatic feature of accounts in recent years-- you need to opt out of it when you open the account. The fee structure is similar to what would be charged for bouncing checks with the difference being the vendor is paid the amount due. The bank on the other hand is in a position to embarass/penalize/pursue criminal action just like with any bounced check if you don't payoff all the costs and fees associated with the bounce.

[Iowa]

45. This news won't affect anyone here...

...because I assume every single DUer has been using a credit union or a small local bank, right?

[True_Blue]

47. The overdraft fees wouldn't have been so bad but

they would always pay the largest bill first, and charge overdraft fees for the smaller bills that didn't get covered.

[No Elephants]

57. Last month, they let me pay by phone without charging $15 for the privilege.

That was a new policy as of that month.

Something's up.