We all get them and more importantly, we all dread them. Overdraft fees will soon become a dreadful reminder of the past for many of America’s banking customers. This new reform implemented by the Federal Reserve for banks such as Bank of America and Chase will take effect this summer and should save many of us young Americans hundreds and perhaps even thousands of dollars. Similar regulation went into effect in 2009 and earlier this year with minimal satisfaction.
An estimated 75% of banks are believed to have automatically enrolled new customers into an overdraft protection plan each year over the past decade. Not only does this generate more debt-ridden consumers, but much of the banks’ revenue. The new regulation will continue to allow overdraft fees on automatic billing and bounced checks but, debit purchases will be without charge.
While this may seem like a blessing to most of us, banks such as Bank of America, which benefited the most from these overdraft and non-sufficient funds fees, are estimated to lose hundreds of millions of dollars with this new regulation in effect. This could potentially spell another cycle of bank failure much like what we saw in 2009 when many of America’s banks had to be rescued by the Federal Reserve.
Consumers will now face a declined notice for debit charges in stores with no accompanied overdraft fees as well as an overdraft fee message at ATMS. However, they will also be expected to save and/or spend the extra dollars – consequently putting more money back into our rejuvenating economy and into our savings’ accounts!