Some good news (maybe?) from some major banks, which say they are changing and cutting back on the overdraft fees they charge, thanks to pressure from the government and consumer groups.
In recent months we've learned that overdraft fees are big business for banks, which are on target for earning nearly $39 billion from them this year. That's up from $29 billion in 2007, according to research firm Celent, which noted that astounding figure is more than consumers spent on major appliances in the same year and twice as much as they spent on books. Studies show that most of the fees are coming from people who are struggling to keep their balances in line with their bills: One study found that 90 percent of overdraft fees were charged to 10 percent of the 130 million customers with checking accounts, while the AP reports that only 5 percent of customers absorbed 68 percent of the overdraft fees.
Something's gotta give, and this is what some of the major banks are are doing. (Mind you, there's justifiable concern that there may be new fees rising up to fill the void that the resulting lost income will create.)
Caps on fees. Right now, you are likely automatically enrolled in an "overdraft protection" plan, which allows you to pay $35 even if your account is overdrawn by a few dollars. This fee can be applied several times a day if several withdrawals are made on an overdrawn account. As of Oct. 19, Bank of America will no longer charge overdraft fees when accounts are overdrawn by less than $10 a day, and you'll have five days to bring your account into balance before being charged $35 for an overdrawn account. Also: the bank will cap the number of times it will charge the $35 for repeated withdrawals over an account balance to four a day--after raising it to 10 this year.
JP Morgan will not charge fees for accounts overdrawn by $5 or less and it will cap the number of fees it can charge a customer for repeated over-withdrawals to three a day. Wells Fargo and Wachovia will go with the same $5 measure and cap the number of fees per day to four.
Opt-IN choice. New Bank of American customers and exiting JP Morgan customers will have the opportunity to opt in to be in the overdraft programs, which will allow the banks to charge the fees and pay out on withdrawals even if there is not enough in customers' accounts.
What this all means is it's a good time to find out exactly how your bank is handling overdraft and other fees to make sure you are not paying for services you don't need. Know your fees. Ask questions and be an informed customer at a time when rules and fees are changing quickly.