Bank of America Corp. said Tuesday it will cap the fees it charges customers for overdrawing their accounts, backpedaling on the hikes the company imposed just this year.
Starting Oct. 19, Bank of America no longer will charge overdraft fees when a customer’s account is overdrawn by less than $10 in one day. A $35 fee will still be levied however if the account isn’t brought into balance within five days.
The Charlotte, N.C.-based bank also will limit to four the number of times an overdraft fee can be charged on an account per day. Just this year, the bank had raised that cap from five to 10. It also raised the fee this year for the first overdraft in a 12-month period to $35 from $25 – a hike that still stands.
Citigroup has a similar policy in place.
But you might want to hold your applause for the moment: overdraft fees are an important source of revenue for banking institutions, which earned $36.7 billion in 2008 for service charges on deposits even as U.S. banks got massive infusions of taxpayer-funded aid. It is therefore doubtful that the banks will let this relaxation of fee confiscation pass without attempts to make up for this profit shortfall in other areas.
Hold Your Applause for Bank of America’s Overdraft Announcement via The Atlantic:
First, Bank of America isn’t doing this by choice: the Federal Reserve had already ruled that on July 1 banks must ask customers to opt-in in order to charge overdraft fees on debit and ATM transactions. So it’s really just following the law. Indeed, BofA’s changes aren’t taking effect until the summer — as the new rule dictates.
Second, these millions of dollars in lost overdraft revenue will hardly just be shrugged off by bank executives. Banks’ response to last spring’s new credit card regulations demonstrated this fact well, as they began increasing interest rates to make up lost profits. There are two ways they could make up for the revenue lost without overdrafts: increase fees elsewhere or cut costs accordingly.