September 23, 2009

Bank of America to revamp overdraft policy

U.S. banking giant Bank of America said it would revamp its overdraft policy, lowering fees and offering customers a chance to opt out of overdraft coverage.

The bank said on Oct. 19 it would stop charging overdraft fees for accounts overdrawn by less than $10 per day, the Charlotte, N.C., Observer reported Wednesday.

The bank also said it would cap overdraft charges at four per day. The current policy caps the $35 charges at 10 per day.

Customers can also inform the bank they no longer want overdrafts covered.

Banks view covering overdrafts as a service -- essentially a short term loan with a fixed fee that kicks in when an account is overdrawn. Many customers, however, see the fees as high charges for small money management mistakes.

Banks have been criticized for not making the policy optional.

The head of Bank of America's consumer banking Brian Moynihan said, customers continued to be stretched more and more, in a tight economy, denying threats from Washington legislators to force the issue with a new law influenced the bank's decision.

Economist Mike Moebs of Moebs Services, said, I highly praise Bank of America. Even if it's totally political, it's a huge step in the right direction.