More than one-fourth of bank customers plan to pay for ATM and debit card overdraft protection under new rules taking effect this month that require consumers to opt in to receive the services, according to a new survey from a nonprofit credit-counseling organization.
The Silver Spring, Md.-based National Foundation for Credit Counseling says 26% of 2,089 consumers it surveyed in July intend to opt in for overdraft protection in spite of fees for such services. The remainder of respondents said they would decline overdraft protection.
That such a high percentage of consumers live so close to the financial edge that they are willing to pay a fee to get purchases approved is “disturbing,” Gail Cunningham, a foundation spokesperson, said in a statement.
“Anticipating that they will overdraw their account, they are willing to exacerbate the problem by paying a fee to have their purchases approved,” Cunningham said. Multiple account overdrafts can result in some “significant financial damage,” she noted.
Industry studies suggest the average bank account overdraft fee is $27, and more than half of $37 billion in fees banks earned last year came from ATM and debit card overdrafts, the foundation says.
The overdraft-protection changes are the result of new Federal Reserve Board rules pertaining to Regulation E of the Electronic Funds Transfer Act (
Under the rules, as of Aug. 15 all new and existing checking account customers must opt in for overdraft protection. Many banks previously provided the service automatically unbeknownst to their customers, who discovered the coverage only after seeing the charges on their statements.
Because of the Reg E changes, JPMorgan Chase & Co. last month said it expects to lose $700 million this year from overdraft fees, while Wells Fargo & Co. expects to lose $500 million in after-tax revenue during the second half of the year. U.S. Bancorp says it expects to lose $230 million to $280 million in overdraft-fee revenue this year.
Bank of America Corp. and Citigroup Inc. do not offer debit card overdraft-protection services to customers. Starting this fall, BofA will give customers the option to pay $35 to overdraw their checking account at an ATM.
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