Bank of America will not charge any overdraft fees, starting from summer 2010 for debit card purchases by eliminating any transactions at the cash register that go beyond a customer’s account balance. Customers of Bank of America will be incapable to use more than they have in their accounts linked to their debit cards soon. Overdraft is known as withdrawals from a bank account exceed than the available balance, and a person who is in this situation is said to be "overdrawn”.
This step may become a common move ahead of new regulations limiting overdraft fees. Federal Reserve set rules that will ban banks from charging fees without first getting permission from the customer, which are set to take effect from July 1, 2010.
Banks are invigorating for a new federal rule which will require them to get permission from account holders before providing overdraft services for debit purchases and A.T.M. withdrawals. This rule was expected to wipe out billions of dollars in overdraft revenue for the banks.
Susan Faulkner, the bank’s deposit and card product executive said that “What our customers kept telling me is just doing let me spend money that I don’t have," he added that the overdraft changes were part of a broader push to build trust among bank’s customers. “We wanted to help them avoid those unexpected overdraft fees.”
However overdraft protection will be continued to offer for a fee, for checks and automatic payments, say to a biller that debits money from an account every month. While making an A.T.M. withdrawal, consumers who try to exceed their balance are already being notified that they will be charged a $35 overdraft fee if they select to proceed.
There has been significant customer and political outcry against overdraft fees on deposit accounts. The fees have become a main resource of revenue for banks over the last decade as they comprehend they could make more money by covering consumer overdrafts, offering a short-term loan for a charge, than in denying them.
According to Moebs Services (an economic research firm), last year alone, about $20 billion from overdraft fees on debit purchases and A.T.M. transactions, and $12 billion more by covering checks and recurring bills were generated by banks.
As of July 1, the Federal Reserve will require that a customer’s consent is obtained by banks before they can charge them overdraft fees for A.T.M. transactions and debit purchases; now many banks automatically enroll customers.
This new rule will be started for existing holders in August while for new customers it will be set to effect on June 19. It will change the terms of the bank, which let overdrafts to go through but only charge a fee if the shortfall is greater than $10.
Greg McBride, who follows the banking industry for Bankrate.com told that readiness has been demonstrated by consumers to pay overdrafts for covering the mortgage and the car payment, he added “but not if it's things like covering a latte and a scone."
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