Just days before a Bank of America customer in Michigan is due to be sentenced for exploiting a company error in order to overdraw his bank account by more $1.5 million and subsequently throw a few too many chips down on the casino table, another major bank has made big overdraft news: For at least the next two years, Chase is eliminating overdraft fee for purchases of $5 or less.
As shocking as it might seem, Chase – the largest bank in the United States in terms of total assets – didn’t make the move out of the goodness of its proverbial heart. It was actually included in the terms of the $110 million settlement of a class-action lawsuit regarding the improper assessment of overdraft fees that the bank agreed to in February (though it’s said that Chase actually suggested the move, ostensibly to buy some good will from prosecutors).
Nevertheless, bank customers were likely pleasantly surprised to find notice of the new policy in a recent statement. “Good news, we're making changes to help you avoid fees,” it read. “For purchases of $5 or less that overdraw your account, we'll no longer charge you an insufficient funds fee, returned item fee, or overdraft protection transfer fee.” This supplements a 2010 policy shift which saw Chase agree not to charge customers overdraft fees when their overall balance was overdrawn by $5 or less at the end of the business day.
If you’re wondering what the most recent change adds, well, it prevents you from being charged fees for each individual small purchase that overdraws your account (though you’ll still face a single fee if your overdrafts total more than $5). For example, if you had $2.00 in your account and bought three $4.00 cups of coffee in a day, you would have been charged three separate overdraft fees prior to the new rule taking effect because at the end of the day, you would have overdrawn your account by more than $5.00 with three purchases made with insufficient funds. Now, you would only be charged one fee. Most banks waive fees for overdrafts that total $5 or less, but Chase and SunTrust are the only major banks to have extended the rule to include subsequent purchases as well, according to the Consumer Federation of America.
For those of us who are Chase customers, that means we won’t have to pay fees that are at least 580% greater than the purchases that triggered them simply because we forgot how much money we had in the bank or because a check did not clear. According to Chase’s checking account disclosure, the fees it assesses for overdrafts are:
- Insufficient Funds Fee: $34 for each purchase that Chase funds on your behalf
- Returned Item Fee: $34 for each purchase you attempt to make with insufficient funds that Chase does not make on your behalf (maximum 3 Insufficient Funds and Returned Item fees per day)
- Extended Overdraft Fee: $15, once after your account is overdrawn for 5 consecutive business days.
- Overdraft Protection Transfer Fee (must enroll): $10 for each day funds are transferred through Overdraft Protection.
At this point, some of you might be asking, “What overdraft fees?” because any transaction that you try to make with insufficient funds is simply declined. That’s because under the new personal finance rules, you have to actually “opt-in” for the ability to withdraw your account by using a debit card to make a purchase or withdraw funds from an ATM (this rule does not apply to automatic payments or checks). Ultimately, while Chase’s new rule abolishing overdraft fees for small purchases is nice, this opt-in requirement will remain the best defense someone who is prone to overdrafts has against unnecessarily high costs.