Bank of America has become the first financial institution to stop overdrafts, not just overdraft fees, from debit cards. That means that the bank won’t let you withdraw more money than you have in your debit-linked bank account. The card simply won’t work. From the AP:
It’s a step that may become a common move ahead of new regulations limiting overdraft fees. Rules set by the Federal Reserve that will ban banks from charging such fees, without first getting permission from the customer, are set to take effect July 1.
But Bank of America is going a step further than the regulations require. It will simply no longer allow debit card purchases to go through if there isn’t enough money in the account. For ATM transactions, customers who try to withdraw more than their balance will have to agree to pay a $35 overdraft fee before they can get the money.
Since the bank doesn’t have the ability to notify the customer when they’re at the register and give them the chance to agree to a fee, it will simply reject such transactions.
Because overdraft fees have been a major source of revenue for banks, a move like this one may signal an end to free checking as we know it, according to a source in the article. Banks will have to find a way to recoup those lost fees.
Interestingly enough, 14% of bank customers generate 93% of overdraft fees, according to the article. If banks can’t continue to target those individuals for revenue, they may have to devise a way to take a little more from everybody. I trust that they will.