Debit Card Fees: Changed, But Still an Easy Way to Get Ripped Off

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The banks say that being threatened with legislation had no impact on their decisions to make annoying debit card overdraft fees slightly less annoying. Instead, Bank of America and Chase say they are changing their fees just to help out their customers. How nice of them.

The changes are reported in the Washington Post, the WSJ, and the NY Times, among others. Basically, new customers will soon be allowed to opt out of overdraft “protection,” in which customers are allowed to spend more than they have in their debit card accounts—in exchange for getting hit with a $35 fee each time they do so. It’s the equivalent of a bounced check fee, only with the customer-service-friendly name “protection.” Chase and BofA are also limiting the number of times per day that someone can get hit with these fees. But even with the changes, clueless customers can still unknowingly get smacked with hundreds of dollars per day in fees.

Some specifics from the Times:

Beginning Oct. 19, Bank of America will stop charging any fees for customers who overdraw their accounts by less than $10 in a single day. It will also limit the number of overdraft fees it charges to four a day, although the bank will continue to charge a fee of $35 per overdraft.

Chase will cap the number of overdraft fees it charges a day to three. It will stop charging fees when accounts are overdrawn by less than $5. Chase’s overdraft fees are $25 for the first fee each year, $32 for the next four and $35 after that.

So the poor saps who are dumb enough to spend more than they have in their accounts—and who do so more than three or four times a day—are thrown a bone. $35 times four times a day equals $140: That’s how much money you could still be handing over to BofA daily, even after the overdraft “reform.”

By early next year, Chase will make another change:

Chase plans to eliminate by the first quarter of next year a common industry practice that enraged many consumers. Instead of lumping a day’s worth of debit card and A.T.M. transactions together and then processing the highest amounts first — a practice that has caused large numbers of consumers to overdraw more quickly and pay more fees — it will credit the transactions chronologically.

I’m sorta shocked that this practice was legal to begin with. By reordering charges to its maximum advantage, Chase was (and still is, until it makes the change in 2010) essentially assessing fees on debit card charges before the person overdrew. What a scam.

The moral is: Read your bank statement closely now, read it closely after the changes are in effect, and keep reading it closely down the line. These companies are very good at taking money from unsuspecting customers, so you must always stay vigilantly on guard. These are not companies to trust.

Though, hey, you can understand why banks have these policies. Guess how much the banks earn on overdrafts, bounced checks, and similar insufficient-fund fees? The figure from 2006, per the WSJ, was nearly $2 billion.

Read more:

Debit Cards vs. Credit Cards: Do You Prefer Debt, Fees, or Both?

New ‘Basic’ Bank of America Credit Card: Basically More of the Same