Bank Of America To End Overdraft Fees On Debit Purchases - Update

(RTTNews) - Bank of America Corp. (BAC: News ) said Wednesday that beginning this summer, it will eliminate overdraft fees on debit card purchases. As part of the move, the bank said it will only allow debit card purchases to go through at a point of sale if there is enough money in the customer's account at the time. The move comes ahead of new regulations that will limit overdraft fees.

According to the bank, the change will help customers by reducing the likelihood they may inadvertently overdraw their account and thus eliminate overdraft fees on these transactions. Rules set by the Federal Reserve that will ban banks from charging such overdraft fees, without first getting permission from the customer, are set to take effect July 1.

Susan Faulkner, Deposits and Card Product executive of bank of America, said, "Our customers have been clear that they want to know if a purchase is going to overdraw their account. 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."

The change is likely to cost Bank of America millions of dollars in revenue. The bank has 37 million debit-card customers who generate 60% of all overdrafts for the bank. Banking institutions reportedly earned $36.7 billion in 2008 for service charges on deposits.

The Charlotte, North Carolina-based bank said that customers will still have the choice to link their checking account to another account through Overdraft Protection to cover these types of transactions. The bank noted that a majority of customers who overdraw their account do so as a result of everyday debit card purchases where the bank is not able to alert them at the time that the purchase may cause an overdraft and result in a fee.

Bank of America said it continues to provide choices for instances when customers need additional flexibility in managing their finances. Customers can link their checking account to a savings or other account through Overdraft Protection, or use another form of payment. They can also access cash through the bank's ATM network, where they will be alerted that the transaction might cause an overdraft and result in a fee. For ATM transactions, customers who try to take more money out than they have will have to agree to pay a $35 overdraft fee before they can take out any money.

Tools and services offered by the bank that provide customers with more flexibility and control in managing their finances include an easy-to-navigate web site as well as electronic alerts when accounts reach a low balance or a customer overdraws. Bank of America said it will set these alerts as an automatic feature for its online banking customers who have a checking account, beginning this summer. In addition, customers will be able to request the bank not to authorize any purchases, payments or withdrawals unless the full transaction amount is available in their checking account or a linked overdraft protection account at that time. Media reports on Tuesday had said that Bank of America intends to end overdraft fees on debit card purchases. The policy would take effect for new customers on record from June 19, while for the existing debit card holders, it would commence in August, reports indicated. The new policy will replace Bank of America's current strategy that allows overdrafts to go through and then only charge a fee if the customer's account balance is below negative $10.00.

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