Bank of America has announced that it is planning to scrap overdraft fees of around $35 for customers whose balance is about to dip below the amount they have in their checking accounts. As one might expect, however, this information is not as good as it seems on the surface, since banks are in business to make profits, how can the money be recovered from elsewhere?
For example, BancorpSouth has the convenience of linking a checking account to a credit card for the sole purpose of allowing a transaction from an account with insufficient funds to be honored. This option is offered when one signs up for a checking account, and if the credit card account does not yet exist, both applications can be made simultaneously. If you do not qualify for a credit card, you can open a savings account for this purpose. At least one is informed of the consequences ahead of time, which makes BancorpSouth a great option. Of course, other banks do have the same option, but whether they are advising new customers ahead of time is not clear.
Bank of America will forewarn you of impending overdraw and the subsequent fee of $35 for the convenience of overdrawing your account, but only if you are extracting funds via one of their ATM machines. However, unless your account is linked to a backup source like your savings account or credit card with a sufficient balance to cover your purchases, the same warning of impending disaster is not given at the store where you are subject to embarrassment when your card is declined for insufficient funds.
If you have given permission for your utility payments to be directly drafted from your account each month, or if you religiously mail checks to cover your household expenses, you will be in for nasty surprise when you do see the $35 charge land on your monthly statement. These charges are not going away completely, despite the fluff about fees being scrapped. In all fairness, this news does not apply solely to Bank of America; it was unfortunate though, that they were the headlines announced March 10, and the folk who have now been attacked for their trouble. The lack of news from other banks only makes one question their proposed changes. As a loyal customer, you have just cause to wonder, and every reason to investigate further.
Bank fees will never go away altogether unless the banking system is to become defunct. Since this is not about to happen (remember, you, the taxpayer kindly bailed them out of the last mess) you are well advised to phone your bank and ask for some printed literature outlining their new policies. As boring as it may be to read, it will save you money in the long term. It also drives home the simple fact that if you don’t have the cash, don’t go shopping.
Source: Hibah Yousuf, (2010) BofA to scrap overdraft fees on debit purchases. Retrieved March 11, 2010 from CNN Money.
