Bank of America announced it will end overdraft fees on debit cards this summer, a move that will cost the bank a large amount of revenue and pressure others to follow suit.
Customers who don’t have enough cash in their accounts to make a purchase will simply be declined.
More than 60% of overdraft fees charged by Bank of America come from debit cards.
A new federal law is forcing banks to get permission from customers before allowing overdrafts on debit purchases and ATM withdrawals, fees that earned banks $20 billion last year.
Regulators became concerned by reports of people paying as much as $40 for a cup of coffee thanks to overdraft fees, and Congress is considering even more restrictive rules.
A 2008 study by the FDIC found that while 75% of customers are never charged overdraft fees, a small group—14% of cardholders—generates 93% of the fees.
[Source: New York Times via Daily Beast]
Notice that B of A didn’t end these fees voluntarily. It happened because of the new federal law passed in Congress.
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