Bank of AmericaAs you may have read just recently, here on WalletPop and elsewhere, Bank of America is ending the way it issues overdrafts. It is abolishing most of them, ending completely the practice of going into a store and inadvertently spending $20 when you only have $6 in your account and then unleashing a torrent of overdraft fees.

Today, Bank of America held a teleconference, which I sat in on, in order to explain to the media their new overdraft policy, which will go into effect this summer. Susan Faulkner, Deposits and Card Product Executive for Bank of America, ably led the discussion.

"It's been well documented about the $40 cup of coffee," said Faulkner, perhaps thinking of a New York Times story that had referenced that example the day before. "The $40 latte has come to an end."

One cogent question from another reporter was why not start this ending of the overdraft policy right now? Why wait until the summer?

Faulkner explained that this is a policy that will require customers to change their spending behavior, so a few months of lead time, to educate everyone, was in order. I was skeptical of that, until reporters began asking question after question: What if you actually want overdrafts? What if you're at the ATM taking money out? What if it's an ATM that isn't in your network?

So maybe Faulkner had a point. With all the confusion about just how the policy will work, they're going to need some time to work it out. In any case, here are some of the significant things to be aware of that I picked up from the press conference:
  • The changes for new customers will come about sometime in June. For existing customers, the changes won't go into effect until August.
  • It will still be possible to have an overdraft, if you have an automatic withdrawal set up on your account. If you've scheduled your car insurance to be paid on the 18th of the month, and you haven't budgeted properly so the money isn't there, the payment will still likely go through, and you'll incur that dreaded overdraft fee. But at least if it's gone through and you aren't aware you're in the negative, you won't be able to use your debit card and spend your way into overdraft oblivion. (Not at Bank of America, anyway. It's easy to forget that this is just one bank making these changes -- not all banks.)
  • Starting this summer, if you go to your ATM and try to take out $50, and you only have $30 in your account, you'll see on the screen that you only have $30, and that if you take out $50, you'll incur a $35 fee on top of that. You have the option to then cancel the transaction. If you're in desperate need of $50 and don't mind paying the fee, then, by all means, keep doing your thing. (That they ever allowed people to take too much money out of their ATM in the first place seems incredibly wrong to me, almost as if you're allowing your customer to use a faulty product, although I suppose there's the argument that the customer could have checked their balance before taking out the $50. Oh well, water under the bridge, or soon it will be.)
  • If you go to a non-Bank of America ATM and try to take out $50 when you only have $30, you won't be warned and you'll still get charged an overdraft fee.
  • If you write a check and the funds aren't available, you'll still get charged a non-sufficient funds fee.
  • If you do want your debits to go through, Bank of America will let you link your checking account to a savings account or credit card. Some customers will still incur overdraft charges, but they'll be a much more manageable $10. (There's no fee if you're an Advantage checking customer.)
In essence, what this ends, or should end, are the overdraft problems that come with using your debit card a little too freely and not keeping a close enough eye on your checking account. Faulkner says Bank of America's decision to end overdraft fees came about due to the results of extensive customer research and feedback. "Customers kept telling us, 'Do not let me spend money I don't have.'"

I asked if the negative publicity surrounding overdraft fees had anything to do with it as well. She sort of dodged my question but acknowledged that Bank of America wants to be transparent with their fees, and that these changes are "all about establishing that trust."

I have to say, a little transparency would be a good start.

Geoff Williams is a frequent contributor to WalletPop. He is also the co-author of the new book "Living Well with Bad Credit."

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