Bank of America Opts Out

Bank of America wants to be the leader in eliminating overdraft fees on checking accounts. But its competitors aren’t following.

Starting July 1 for new customers and August 15 for existing customers, the Charlotte-based bank will no longer charge overdraft fees.

Instead of dropping such fees as BofA has done, many banks are mounting outreach campaigns that pitch overdraft service as an option for consumers.

All banks this summer are required by new federal Regulation E to allow customers to opt in to any program that charges them a one-time fee for overdrawing a checking account with an ATM or debit card. Overdraft fees can no longer be an automatic component of basic checking accounts

Many analysts had predicted BofA’s move would prompt other banks to kill overdraft fees. Instead, many are keeping the overdraft service—and marketing it.

Wells Fargo, BB&T, Fifth Third Bank, and SunTrust Bank all have links on their websites to enroll customers in overdraft services that can charge up to $36 per transaction.

“We believe our customers want choices when it comes to managing their checking accounts,” Josh Dunn, a spokesman for Wells Fargo and Wachovia.

Wells Fargo, much like its national and regional competitors, also offers customers the ability to link their savings accounts and credit cards to debit cards as a way to prevent overdrafting.

Bankrate.com senior analyst Greg McBride calls BofA’s elimination of overdraft fees a “bold step,” especially as other banks take a different tack. He notes a Federal Deposit Insurance Corp. survey shows 90 percent of all overdraft fees are incurred by 14 percent of account holders. If that group largely opts to continue incurring overdraft fees, then most banks won’t follow BofA’s lead, he says.

“There’s a definite fork in the road,” McBride says. “Do those 14 percent opt in or not? That will dictate which way this goes.”

To read more about the debate over bank fees, click here for the full story from the Charlotte Business Journal (subscription required).