March 29, 2024

Bucks Blog: Debit Overdraft Fees, While Voluntary, Are Still Steep

Elaine Thompson/Associated Press

Even though banks now must get permission from their customers before charging overdraft fees on debit card purchases, the fees they charge are still hefty — and some big banks have increased the maximum number of overdraft fees customers can run up each day.

A review by the Consumer Federation of America, an association of nonprofit groups, found that in the year since the Federal Reserve required banks to have customers “opt in” to debit overdraft protection, the typical overdraft fee at 14 large banks is still $35, with some charging as much as $37 per incident. That far exceeds the typical debit card overdraft of $20, the report notes.

One bank, BBT, doubled the maximum number of overdraft fees it charges in a day, to eight from four, the review found, and Regions Bank increased its daily limit to six from four.

But those banks still fall short of Fifth Third, which charges up to 10 overdraft fees per day. The bank starts off with a $25 fee, but charges higher fees for successive overdrafts in the same 12 months. That means it’s possible for Fifth Third customers to pay as much as $370 in fees in a single day if they hit the maximum, the report says.

“The fees are out of all proportion to the typical overdraft,” says Jean Ann Fox, the organization’s director of financial services. She notes that while the Federal Reserve now requires customers to actively choose the debit overdraft option, they can always change their minds and “opt out” if they are paying too many fees.

The federation would prefer that regulators require that banks simply deny debit transactions if an account lacks the funds to cover a purchase or withdrawal. Citibank has always followed that policy for debit cards and A.T.M. transactions, the report notes, and HSBC does now as well. Bank of America does not permit debit card overdrafts for single purchases, the report says, but  does allow consumers to overdraw at the A.T.M. — at a cost of $35 per transaction — with customer approval  each time, at the point of transaction.

All except five of the banks (Capital One, Citibank, HSBC, Regions Bank and Wells Fargo) tack on extra fees if the original overdraft isn’t repaid within a specified number of days. SunTrust, for instance, charges a second $36 fee after seven days, and JPMorgan Chase adds on $15 for every five days the overdraft remains unpaid.

The report notes that the order in which banks pay transactions has a big impact on the number of overdraft fees their customers are charged. Most big banks still process payments in order of the largest to the smallest, which results in more overdraft fees, although some are beginning to change their practices. Citibank, for instance recently started paying checks in order from smallest to largest. A few banks use a hybrid approach, paying debit and A.T.M. transactions in the order they occur but posting checks from highest to lowest.

Do you incur debit overdraft fees? Would you prefer that your bank simply deny the transaction?

Article source: http://feeds.nytimes.com/click.phdo?i=96b4dc47c1333d4fa9145f3cda005a9b

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