Bank Of America Bringing Back Overdraft Fees?

After their announcement last August that overdraft fees were eliminated, we learned earlier this year that Bank of America may reinstate a form of overdraft fees. A spokesperson for Bank of America was cited in a Reuters News Service report that they will be bringing some fees back.

The new service would alert debit card users via a text message if a transaction would overdraw their account. Then, the user could respond and choose to overdraw the account and be charged a fee. This real time mechanism is very customer centric. At least this would put an end to surprise fees that you have to fight over after the fact.

How Banks Decide Which Overdrafts To Pay
Each bank has their own rules for overdraft settings so it is a good idea to check with your bank to understand how they work. In general, the overdraft setting for your checking account determines how the bank handles your transactions when you do not have enough money in your checking account to cover an item presented to the bank for payment.

Many banks pay overdrafts at their own discretion based on factors such as the purchase or withdrawal amount and your account history. There is no guarantee that your bank will always authorize and pay any type of transaction. For example, if you already have a history of overdrafts or if there is no direct deposit history on your account, the bank will have much less confidence that you will make good on your check and they typically will not pay your overdrafts.

New Consumer Law Gives Overdraft Options
In August of 2010, the government passed a law revising Regulation E which is a law that governs electronic banking. Reg E requires banks to allow customers to opt-in to programs that will result in a charge if a checking account is overdrawn with an ATM or debit card. Since then, banks have been hard at work building new technology to put overdraft decisions into the customer's hands. Since then, banking technology leaders like Bank of America have been working to build on-demand overdraft capabilities like the aforementioned text message system.

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