Bank of America to End Debit Card Overdraft Fees

Just about when new rules take effect forcing banks to halt overdraft fees unless a customer opts-in, Bank of America has decided to do away with overdraft fees on debit card purchases altogether.

The nation’s largest bank stands to lose tens of millions, or more, in fee revenue. And now may force top competitors to follow suit.

Starting this summer, Bank of America debit card customers without sufficient money in their checking accounts will be denied purchases.

The bank will continue to charge overdraft fees in transactions involving checks or automated account debits. But it said most customers overdraw on their accounts with their debit cards.

Bank of America is also going to offer alerts to online customers if their checking account balance is too low or overdrawn.

“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.”

Last October, Bank of America stopped charging any fees for customers who overdraw their accounts by less than $10 in a single day.  It also limited the number of overdraft fees it charges to four a day. Those restrictions alone cost BofA more than $150 million in lost revenue, the bank has reported.

Bank of America said today it acted after researching consumer preferences which showed that customers would rather not be allowed to make a purchase then to be overdrawn on their accounts.

Bank of America will likely implement the new policy about July 1, which is when new federal rules take effect prohibiting financial institutions from charging overdraft fees for ATM and one-time debit card transactions, unless a customer consents.

The new rule by the Federal Reserve virtually puts to an end what consumers and their advocacy groups have been complaining about for years – the practices of standard overdraft fees charged by banks — as much as $30 in most cases – each time a customer overdraws on an account.