Bank of America, Chase reform overdraft fees

As banks are pressured to reduce the fees that net them billions per years, two say they will allow customers to opt out of the ability to overspend.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Julianne Pepitone, staff reporter

When will you be debt free?
Enter credit card information
  CC name Balance
Choose a plan
Minimum payments only
Fixed payments
$ monthly
Debt-free deadline
I want to pay off my credit cards in:
years and months
Ranking the rescues
The collapse of Lehman led to a deeper recession and a litany of government programs to try to end the pain. We rate just how bold and effective the plans have been so far.
Obama: 200 days in office
Snapshots of the economy after 200 days of the Obama administration.

NEW YORK ( -- Bank of America and JPMorgan Chase said Monday they will reduce overdraft fees and overhaul checking account options, amid a burgeoning backlash over banks' policies on overspending.

Overdraft fees reap banks billions of dollars per year -- and as financial system reform remains in national focus, consumers and lawmakers alike have called for banks to revamp their penalties.

Beginning Oct. 19, Bank of America (BAC, Fortune 500) says it will allow customers to opt out of the ability to outspend their accounts, and it will no longer charge fees for more than four items per day or on overdrawn balances of less than $10.

In June, the bank will limit the number of times in a year consumers can overdraw their accounts using debit cards in stores, and new customers will be able to opt out of overdrafts when they open their accounts.

JPMorgan Chase (JPM, Fortune 500) said it will eliminate overdraft fees for debit cards unless customers opt in, and it will cut the maximum amount of overdrafts per day to three from six. It will no longer charge for overdrawn balances of less than $5.

Chase customers are already prohibited from withdrawing more cash from an ATM than they have available in their account.

Overdraft uproar. A report last month from Moebs Services said U.S. banks will collect a record $38.5 billion in overdraft fees this year, with nearly all the revenue paid by just 10% of customers. The windfall is nearly double the $19.9 billion collected in 2000, as overdraft fees tick higher despite the recession.

The Moebs report said the national median overdraft fee rose to $26 from $25 in 2008, while larger Wall Street banks charge a median of $35.

Last week, Senate Banking Committee chairman Christopher Dodd, D-Conn., said he plans to write legislation that would require banks to get overdraft permission from customers. If a customer declines, any attempt to overspend would be rejected. A similar bill is pending in the House.

In May, President Obama signed into law a credit card reform act, and his administration has unveiled the first part of its plan. So far, the act has forced credit card issuers to mail bills earlier and give customers more advance notice before changing a contract.

More significant changes are expected in February, when the second half of the act is implemented.  To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
17 cool gadgets that tease the future Smart telescopes, surveillance for dogs, an electric roadster and more from CES 2018. More
These 12 airplane beds let you really sleep on a flight For the price of a premium class ticket, you may just get a space that's comfortable, private, and quiet enough to ensure a good rest. More
CES 2018 kicks off with oddball gadgets The biggest tech show of the year opened with a collection of quirky gadgets. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play