Business OpportunitiesBofA, JPMorgan reduce fees on overdrafts
Bank of America Corp and JPMorgan Chase & Co, the two biggest US banks by deposits, are cutting overdraft fees amid criticism from lawmakers over the way the lenders charge customers.
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The two banks, which currently enroll all checking accounts in overdraft protection, will allow consumers to opt out of the service, eliminating the potential for paying overdraft fees. JPMorgan will cancel fees for accounts overdrawn by $5 or less, according to an e-mailed statement from the New York-based bank. Bank of America will end fees on accounts that are short $10 or less, it said in a statement Tuesday.
Banks and credit-card lenders have come under fire from Congress for practices relating to the fees. Lawmakers passed credit-card legislation earlier this year that carried provisions requiring lenders to apply payments to loans with the highest interest rates first.
“We recognise the tremendous growth in our customers’ debit-card usage and we’re revamping our overdraft policies and posting order to be more consistent with the way they use their accounts today,” Charlie Scharf, head of Retail Financial Services at JPMorgan Chase, said in the statement.
Currently, JPMorgan charges $25 for the first infraction in 12 months, $32 for overdrafts up to four times, and $35 after that. Bank of America charges $35 if the amount overdrawn is more than $5 and a $10 fee for shortfalls of $5 or less.
Three penalties
Those who continue to have overdraft protection at JPMorgan will pay a maximum of three penalties per day, down from six. Bank of America will cap its fees at four per day, down from 10.
JPMorgan will apply the changes to all current and new checking accounts, to take effect in the first quarter of 2010. The bank said it will deduct charges as they occur instead of at the end of the day, starting with the largest amount.
Bank of America will introduce some changes beginning October 19, while others will begin June 2010, including a limit on the number of times a customer can overdraw an account.
The amount of lost fee revenue wasn’t disclosed by either firm. A study by the Federal Deposit Insurance Corp released in November 2008 found that customers paid from $10 to $38 to use overdraft protection. Banks earned an estimated $1.97 billion from the service in 2006, the survey said.