Banks Make Moves to Ease Debit Card Overdraft Fees

Under attack for excessive overdraft fees from consumers, legislators and even  disgruntled customers on YouTube, three of the largest U.S. banks have changed their  debit card rules by lowering or eliminating fees and giving customers more options.

Much of the criticism has centered on overdraft fee policies, which banks have used to issue multiple charges to debit card users. Those users may not have realized they  lacked sufficient money in their bank accounts to cover purchases. Most banks lack the  option of placing a stop on debit card usage when the card’s linked account hits zero.

The banks are moving quickly to make lives easier for debit card users.

Chase, Bank of America and Wells Fargo have announced that they will now allow customers to opt out of overdraft coverage. Other banks are expected to follow suit.

Consumers who overdraw with the debit cards often do not realize that overdraft coverage is automatic, and that the bank does not cut off their ability to use the card. Some  banks also refuse to turn off the coverage, even when a customer asks to opt out of the  coverage. 

The uproar over these fees have made national news this month. Some card users hit with  multiple overdraft fees gained sudden fame in recent days by taking their “crusade”  against certain banks to the Internet, recording videos on YouTube that drew huge  numbers of viewings.

Also, Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate Banking  Committee, has announced that he was drafting legislation to restrict overdraft fees.  His bill would require banks to cover overdrafts only when consumers ask for such a  services. The Federal Reserve is also mulling over new rules requiring banks to get  permission from consumers before enrolling them in overdraft programs.

In its new policy, Chase plans to eliminate by early next year, a common practice of  grouping a day’s worth of debit card and A.T.M. transactions together, and then  processing the highest amounts first. This practice has caused consumers to overdraw  more quickly and be charged more fees. Chase will now credit the transactions  chronologically.

Bank of America announced it would allow current customers to cut off their ability to  use their debit card when their account hits zero, starting Oct. 19. Next June, the bank plans to limit the number of times each year that current customers can overdraw their  accounts when using a debit card at a store. It will also let new customers choose whether  they want overdraft protection when opening an account.