Wednesday, March 10, 2010

Debit card overdrafts

In a significant policy reversal, the USA's largest bank plans will stop allowing consumers to overdraw their checking accounts with one-time debit card transactions.

Bank of America's (BAC) new policy — which takes effect in mid-June for new customers and early August for existing customers — comes amid intense public scrutiny of financial institutions' overdraft fees. In 2009, banks earned about $38.5 billion from overdraft and insufficient-funds fees, estimates Moebs Services, an economic research firm.

Congress is weighing legislation to crack down on these fees. And the Federal Reserve has issued a rule that requires financial institutions to get consumers' consent before charging them to pay certain debit card and ATM overdrafts.

If you don't let banks charge fees to those who bounce checks (and a "debit card overdraft" is a bounced e-check) by spending money they don't have in their accounts, those of us who don't bounce checks with regularity will suffer when we make our once a decade mistake.

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