How Eliminating Overdraft Fees Could Cost You Annoying overdraft fees on insignificant purchases may be on their way out. Starting this summer, banks will have to get their customers to "opt in" if they want overdraft protection on debit card transactions. But the new rules won't necessarily ease a person's cash flow; banks are finding other ways to make the money back.
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How Eliminating Overdraft Fees Could Cost You

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How Eliminating Overdraft Fees Could Cost You

How Eliminating Overdraft Fees Could Cost You

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AUDIE CORNISH, host:

Meanwhile, some banks are jumping ahead of a new federal rule that requires them to get permission from their customers before allowing them to spend or withdraw money they don't have. This past week, Bank of America has said it will eliminate overdraft fees on purchases made with debit cards. If a customer doesn't have enough money in their account, the charge will simply be declined.

But as NPR's Tamara Keith reports, banks will still find ways to make money.

TAMARA KEITH: Twenty billion dollars is a lot of money to leave on the table. That's how much banks made last year on overdraft fees on debit card purchases and ATM withdrawals. And while Bank of America may have chosen to forego some of those fees, other banks are working on ways to get their customers to opt in.

Scott Talbott is with the Financial Services Roundtable, which represents the nation's largest financial institutions.

Mr. SCOTT TALBOTT (Financial Services Roundtable): Customers will have a lot more choices. We see one company saying we simply won't charge overdraft fees, another company saying we won't charge for the first three overdrafts. Another company is responding to the changes by saying we won't charge if your account is overdrawn by $10 or less.

KEITH: As it stands now, 57 percent of people say they plan to opt out. That's according to a survey conducted by Act On Marketing. Gary Gablehouse says Act On is helping banks develop strategies for getting their customers to opt in.

Mr. GARY GABLEHOUSE: There could actually be a net increase of fees to a bank because you made it up on volume because you robbed the customers from the banks that are doing it wrong.

KEITH: Gablehouse says there are some customers out there who really like overdraft protection, who want to be able to buy a sandwich even though they have no money in the bank, and are willing to pay a $30 fee to avoid the embarrassment of being turned down at the check stand.

Greg McBride with BankRate.com says most overdraft fees are paid by relatively few people.

Mr. GREG MCBRIDE (BankRate.com): It is a mistake that anybody could make, but the key is to only make it once if you're going to make it. And the fact was that 14 percent of customers were generating 93 percent of the overdraft revenue.

KEITH: Indirectly, those frequent overdrafters probably helped pay for the rest of us to enjoy things like free checking. And going forward, McBride says that free checking is going to be harder to come by.

Mr. MCBRIDE: There are always going to be unintended consequences. If you're one of those 75 percent of people who never overdraws your account, the fact that this may curtail the availability of free checking could prove to be an inconvenience to you.

KEITH: McBride says banks will always find new ways to make money. They are businesses, after all. Scott Talbott from the Financial Services Roundtable prefers to put it a little differently.

Mr. TALBOTT: It's not so much a one-to-one connection between, oh, we've lost revenue here, we need to make it up someplace else. Rather, banks will seek to find that mix of goods and services that their customers need. And, of course, there could be fees associated with that.

KEITH: It's an open question whether a year from now consumers will be saying thank goodness we got rid of those onerous overdraft fees or whether we'll fondly reflect on the good old days when there were fewer fees and easier access to free checking.

Tamara Keith, NPR News, Washington.

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