Recently, Bank of America announced a new debit card where card holders will be charged $4.95 per month for overdraft protection. The pitch to cardholders is that if they overdraw their accounts they will not rack up sizable overdraft fees. On the surface, this might sound like a good deal to people who keep a low balance in their account and worry about accidentally triggering overdraft fees.
But, the reality is quite different. That’s because bank customers can’t overdraft their accounts unless they opt in for overdraft protection. Gone are the days when banks could opt you in (without your knowledge) for overdraft protection and then charge you hefty fees ($35 per overdraft) for going pennies below your balance when you use your debit card.
Allowing unaware customers to overdraft their account and then forcing them to pay $35 for this “privilege” mobilized consumers and their advocates to press for reform. Thanks to banking reform legislation passed in 2010 (which Green America and its members supported), bank customers have to opt-in for overdraft protection. If they don’t opt-in for the protection, and they attempt to overdraft their account, their card is simply rejected and no fee is charged. Unfortunately, many consumers don’t understand this. A 2011 survey of consumers who opted in for overdraft protection found that 66% of them mistakenly signed up for the service because they thought that if their debit card was rejected for trying to make an overdraft they would be charged a fee simply for being rejected. They didn’t realize that the law prohibited the bank from charging any form of overdraft (or attempted overdraft) fee without the customer’s consent.
Bank of America is preying on this misperception to offer consumers a new “benefit” – an account that prevents overdraft fees – that no one actually needs. And, consumers will pay almost $60 per year for this faux benefit. Sadly, it is consumers who have the most to lose, those that are low- or moderate-income, that will fall for this latest megabank scheme to help the gullible part with their money.
Consumers would be much better off banking with a local community development bank or credit union that doesn’t seek to profit from gotcha clauses and ever-expanding fees. You can bring in $60 to open an account, and support your local community. Hundreds of options are available at Green America’s Break Up with Your Mega-bank site. And, while you’re at it, if you are still carrying a Bank of America credit card, you can get a great credit card from a community development bank or credit union with Green America’s Take Charge of Your Card campaign. Then, make sure to let Bank of America know you are leaving them because you don’t approve of the way they do banking.