Starting Oct. 19, Bank of America and Chase, the two largest bank companies in the nation, will be changing the way customers deal with overdrawing from their checking account.
Normally, consumers are slammed with fees once they overdraft from the ATM or write a check for money that is not in their account. However, Bank of America and Chase are lowering charges for those who do not opt out of their new policy that will be implemented in a few weeks.
With these fees adding up to billions of dollars for the banking industry every year, this change comes as the lawmakers and regulators in the nation’s capital push banks to reform charges that consumers are not aware of. The Federal Reserve is currently contemplating whether to require banks to get customers’ permission before they are automatically registered in these overdraft protection programs. For now, however, Bank of America members will be involuntarily signed up for this program starting Oct. 19.
Bank of America and JPMorgan Chase are undergoing drastic changes throughout their companies, specifically debit card programs. The banks are currently lowering and eliminating many fees, as well as allowing customers to choose whether they would like to utilize their new program called “Overdraft Protection”.
T.J. Crawford of media relations from Bank of America is optimistic about this new policy.
“We think that customers will be really receptive to it. It’s part of a larger effort by Bank of America to provide customers with more choice, which is also important in the current economic environment,” Crawford said.
The concern, especially for college students, is that most students do not know what an overdraft policy is. And if they do, they are not aware of what their bank’s policy consists of.
Moving in freshman year, many UNH students (especially those who come from out of state) feel as if they are pressured into signing up for Bank of America accounts since it is the only national bank in Durham.
“I definitely felt pressure to sign up for Bank of America,” sophomore Libby DeAmicis said. “I was a member of M&T bank, which does not exist out here. I had to switch because Bank of America was the only bank in New Hampshire that was also in New York. I really miss being a member of M&T. Bank of America is not as on top of things as M&T and doesn’t update me.”
Jessamine Martin, originally from California, also set up an account with Bank of America upon arrival in Durham.
“I had to change to Bank of America because my previous bank doesn't go farther than the midwest, and Bank of America just seemed like it would be everywhere,” Martin said. “Changing accounts was very annoying, and I miss my old bank.”
When a consumer writes a check or withdraws more money than is in their account, the bank will charge them an overdraft fee. When more than five dollars is overdrawn, the consumer is charged $35 for each item.
Once the bank has approved all of the consumer’s transactions from the day and if the consumer has only overdrawn less than $5 the fee is changed. If the overdraft is less than $5, the consumer is only charged $10 per item.
Throughout the course of one day, a consumer can be charged a maximum of 10 overdraft and insufficient fund fees. Also, come June, current customers will only have a set number of times they will be permitted to overdraw from their accounts while using their debit card at a store.
The Overdraft Protection system works by taking money from other accounts to finish the original transaction. So if you don’t have enough money from the account you are pulling from, the bank will automatically pull funds from other accounts you have with them to finish the deal.
This seems great compared to other banks’ fees, but fill up that account fast once overdrafting occurs. If a customer fails to deposit money to replenish their funds within five business days, the bank will charge them an additional $35. This is known as the “Extended Overdrawn Balance Charge”.
Freshman Julia Miller, who also felt pushed into creating a Bank of America account, overdrew from her account in the past.
“I overdrew at my account back home and it was 30 dollars, and then five dollars a day [until it was replenished],” Miller said. “Now, I just keep tabs on how much money I have in my account. It's simple.”
When withdrawing money from the ATM, it is important to remember that the number on the screen may not reflect the amount of money in the account, especially when checks you wrote have not been cashed yet. It is recommended that you keep a small amount of “cushion money” in your account to avoid over drafting. It is also wise to manually keep track of checks written and withdraws taken from your checking account to avoid fees and banking errors.
Also, Bank of America encourages utilizing online banking. It allows 24/7 access to accounts, and it’s an easy way to keep track of funds, with the computer doing the math. There is an option to set up automated alerts as well. This way, when accounts get to a specific amount, a warning that only a certain amount is left to withdraw or spend is generated.
Even if you do make use of these banking methods, Bank of America still encourages consumers to set up an overdraft protection account with this new policy. This will defend any accounts linked to their savings account, credit card or line of credit from outrageous fees.
“I think the key regarding to being able to opt in or opt out is that it offers more choices for students,” Crawford said. “Many customers (including students), they understand and rely on the convenience of overdraft coverage, which is why we want that option to be available to those who choose it.”
Crawford also pointed out a recent study conducted by the ABA, or American Bankers Association. According to the study, “of those who did pay an overdraft fee in the past 12 months, almost all (96 percent) said they were glad the payment was covered.”
If overdraft protection still seems supercilious and unnecessary, customers need to visit a Bank of America on October 19 (the closest ones are in Dover and Newmarket). If and when they take their name off the list for this new procedure, the bank will disable them from overdrawing from their account. Bank of America will automatically cut consumers off when they withdraw too much from their checking account at the ATM or spend too much on their debit card. If customers opt out, Bank of America will also stop covering their bounced checks.
Most students enrolled with Bank of America did not know if they plan on sticking with this new policy.
“I’m not sure yet, I will have to look more into it now,” Martin said.
DeAmicis and Miller, merely two of countless students unaware of the bank’s policy changes, plan on keeping themselves on the list.
“I mean, what are you going to do?” DeAmicis said. “When you overdraft, you have to pay the consequences. That includes paying the money. I think it’s fair.”
Bank of America continues to remain optimistic about the change as well as giving their customers an option. “I can’t speculate as to how many students will or won’t opt out. The key,” Crawford said, “is now they have the choice.”
