Everybody seems to hate overdraft fees. Over the last few months, we have seen thousands of consumer complaints about this “service,” in which banks offer you the ability to withdraw more money than is available in your account, for a fee.  Many of these complaints revolve around the fact that this option is automatically added to your account, and so people aren’t aware that this is happening until they get their monthly statement and are stuck with extra charges.  In order to rectify this, some banks now offer customers the ability to “opt-out” of overdraft coverage for their accounts.

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Changes in Overdraft Policies

Heeding the complaints of their customers, the larger U.S. banks have recently made some changes to their overdraft fee policies (see “Chase and Bank of America Offer Relief from Overdraft Fees” and “Wells Fargo Jumps on the Overdraft Elimination Bandwagon.”) But so far, Bank of America, US Bank and BB&T are the only banks to openly offer their customers the option of completely eliminating overdraft fees from their account.  Chase hopes by early 2010 to offer new customers the ability to only receive overdraft coverage if they “opt-in” when opening a new account, but so far do not offer customers the ability to get rid of overdraft coverage.

How to Opt-Out

It may be possible to opt-out of overdraft coverage at any bank, but most banks do not make the process easy.  Though the exact process of opting out of the service is not yet a simple one at any bank, US Bank and Bank of America have made it clear to both their customers and employees that the service is now completely optional, which makes the process much smoother.

US Bank – so far you are only able to opt out of overdraft services at your local US Bank branch; telephone banking and online banking representatives will not be able to do it for you. However, when opening an account or talking to you teller about an existing account, simply mention that you would like to decline overdraft coverage services and the next time you try to spend more than is in your account, your card will simply be denied.

Bank of America – although you cannot yet opt out of overdraft protection online, Bank of America does allow you to opt out of the service over the phone; simply call the banks customer service line at 1-800-622-8731, and follow the instructions to talk to a customer service representative. Tell them that you would like to opt out of overdraft coverage, and after verifying your account information they will take it off your account.  You can also do this at your local Bank of America branch. (Starting July 2010, new customers will be given the option of overdraft coverage when opening an account.)

BB&T – BB&T also lets current customers opt-out of the overdraft service over the phone. Call 1-800-226-5228, and tell the customer service representative that you no longer want overdraft coverage on your account. You can also do this at a local BB&T branch.

Its that easy! Just a few simple steps, and your overdraft nightmares are over. Now of course this doesn’t mean that you can just go swiping your debit card with reckless abandon; even without overdraft coverage, attempting to take out more money than you have in your account can cost you an non-sufficient fund (NSF) fee, more commonly known as the “bounced check fee,” which can be just as expensive as overdraft. The bank has the right to charge you this fee even if they don’t approve the transaction that overdrew your account, so you may get the double whammy of not having the money go through and being charged for it.

Most of all, make sure you are assertive when trying to opt out. Banks make a lot of money off of overdraft charges, and so do not make it easy for you to get rid of the service. But it is an optional service, and even though US Bank and Bank of America are the only banks that officially offer the option to get rid of the service, if you are willing to spend some time talking to customer service, you can most likely get your bank to get rid of overdraft coverage on your account as well, even if it requires some extensive paperwork signing.

Pressures from regulators may have also led to the revisions; there has been talk in the Senate of passing a law that allow customers to opt-out of overdraft services, and the Federal Reserve has proposed that banks be required to ask permission before automatically enrolling customers in overdraft services.  While so far these changes are not a requirement and offer only adjustments to overdraft policies, both banks have expressed intentions of completely eliminating overdraft fees in the next year.

Bank of America and Chase Overdraft Policy Changes

Bank of America has also stated that it intends to roll out additional changes in June of 2010, including an annual limit on overdrafts, after which customers will not be able to overdraw.  Bank of America will also contact customers who are nearing that limit with money management advice, and offer new customers the choice of whether they want overdraft capability when they open an account.  While Chase currently does not offer the ability to opt out, it says it will provide customers with information on how to do this once the new system is in place.

Chase and Bank of America: Trendsetters in Eliminating Overdraft Fees?

By jumping the gun and making changes to their overdraft policies before regulations force them two, Bank of America and Chase are not only hoping to relieve some of the increasing pressure being placed on them by lawmakers, but also are throwing down the gauntlet for other major banks to change their overdraft fee policies.  As a service that brings in tens of billion dollars annually, many banks are going to be reluctant to give up revenue from overdraft fees, but may be forced to if consumers begin to flock to banks that eliminate fees for small overdrafts, or allow them to opt-out of the service altogether.

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In 2000, 19.9 billion was collected in overdraft fees, but 9 years later such colossal numbers have nearly doubled in spite of the recession. “Overdrafts are the mother lode of all service-related charges, and they’re often the only source of capital,” said Mike Moebs, chief executive of research company Moebs Services. “Still, we had never seen fees go higher in any recession until now.” According to research reports, U.S. banks will gather a record of $38.5 billion in overdraft fees this year, with nearly all the revenue paid by just 10% of customers – a percentage made up of mostly consumers with credit scores in the lower range (below 590).

The national median overdraft fee rose by a whole dollar from $25 to $26 in 2008, while larger U.S. banks charge a norm of $35. Moebs stated that, such fee increases have helped banks enhance profit in the midst of the recession. Additionally, government-mandated overdraft fee increases are no big help. For example, if a U.S. post office decides to increase its overdraft fees, retailers note the increase in profit and decide to raise their own fees. Consequently, banks follow this trend in hopes of raising revenue and net income.

Banks have agreed to stop overdraft fees

Fortunately for some, the Federal Reserve and other lawmakers are discussing rules about overdraft fees, and some banks have agreed to stop overdraft fees. As of earlier this week, American Express and Discover Bank have agreed to drop the overdraft penalty, which will take place starting this October. This is due to the Credit Card Accountability, Responsibility and Disclosure Act, which prevents card companies from charging clients unless they “specifically ask to breach their limit and agree to pay for the privilege.” While other banks are not about to give up the fees that benefit them, they are complying by not raising fees. For example, a JPMorgan Chase spokesman told CNN that his company has not raised overdraft fees from 2008. Instead, Chase Bank charges overdraft fees depending on number of times it occurs ranging from $25 to $35. A Bank of America spokeswoman also said the bank decided not to raise the $35 fee. Capital One and Citigoup are considering following these footsteps as well.

Hopefully, some larger Wall Street banks will take notice of letting the reigns loose on overdraft fees, and help consumers during the struggle of the recession by minimizing or putting a hold on their unfair charges.