Banks Limit Debit Cards Fees, But Will it Make a Difference?

In light of growing discontent over their unfair debit card fees, some big banks are considering changing their tune - ever so slightly.

Financial giants JPMorgan Chase and Bank of America just announced changes to their overdraft protection policies. Though they won't eliminate the controversial program, both banks plan to limit the amount of overdraft fees a customer can rack up per day and allow consumers to choose whether to opt in to the program, which is currently automatic. But will it be enough?

Right now, many people don't even realize they're part of their bank's overdraft protection program - an ironic name, considering it doesn't do much to protect consumers - until they're surprised by overdraft fees on their bank statement. What is overdraft protection? When you overdraw with your debit card, your bank kindly allows the transaction to go through by covering the difference - without telling you about it.

Let's say you're buying a $2 cup of coffee, unaware that you only have $1.50 in your account. Instead of simply declining your debit card (like banks used to do a decade ago) or giving you the option to scrap the transaction, banks cover that 50 cents - and charge you $40 or so. It's like having a short-term loan with an annual interest rate of sometimes 3,000% or more!

So how will the proposed changes affect consumers? Limiting the number of overdraft charges you can incur per day - for instance, Chase will reduce the maximum number of charges from six to three - won't do much, because it means you could still ring up more than a hundred bucks in fees daily without realizing it. Allowing you the option to opt out of the program, however, is key - and hopefully more banks follow suit. But don't forget that big banks are all about their bottom line. Just because they won't cover the difference when you overdraw doesn't mean they won't charge you for something else. All I'm saying is don't expect your bank to look out for you - not when they can make a profit.

Fees aside, it's a good idea to stay aware of what's in your account. And if you can never keep your balance high enough to avoid overdrawing, maybe it's time to analyze why. For many folks, it's because non-mortgage debts - credit card, medical, tax or otherwise - are sucking all the money from their paychecks, making it difficult to pay for other necessities, like the mortgage. But it doesn't have to be that way. If your debt burden has gotten too big to handle alone, bankruptcy can help.

Sign up for a free personal debt analysis with DebtStoppers and one of our Atlanta bankruptcy attorneys will identify a bankruptcy plan right for your individual situation. We'll also take care of any questions or concerns you have for free - and at no obligation. Unlike big banks, we're about your bottom line.

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