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PHILADELPHIA
— The end is approaching for the surprise
$37
cup of coffee or
$40
hoagie — the ones for which
$2
went to
Starbucks
or
$5
to
Subway
and
$35
went to your bank for busting through your balance.
Starting
Thursday, new federal rules say that banks can charge
new customers an overdraft fee for debit-card purchases
or ATM withdrawals only if the bank has obtained
permission beforehand to cover the shortfall.
Similar
rules take effect
Aug. 15
for existing bank customers — a deadline that has
caused a frenzy of activity at banks eager to keep their
share of a revenue stream that advocates say is worth
more than
$11 billion
a year.
At least
a few, including
Citibank
and
Bank of America
, have chosen to opt out themselves. Both say that they
will no longer routinely allow customers to spend money
beyond their balances in exchange for fees that
elsewhere can total more than
$100
or
$200
a day if a customer makes multiple overdrafts.
"This
is really a result of listening to our customers, the
vast majority of whom have said they don't want to spend
money that is not in their account,"
T.J. Crawford
, a
Bank of America
spokesman, said Wednesday.
Bank of America
announced its decision in March, saying it would help
customers "control their finances by reducing the
possibility of overextending themselves at the point of
sale."
But
according to a
Consumer Federation of America
survey, 13 of the nation's 15 largest banks are inviting
customers to opt in to their overdraft programs.
"We're
offering our customers a choice rather than making the
decision for them," said
Barbara Nate
, a spokeswoman for Wachovia, which is owned by
Wells Fargo
. "We always try to educate our customers as to
their options."
In a
customer brochure, Wachovia says the advantages of its
Debit Card Overdraft Service include the convenience of
being able to complete a transaction despite
insufficient funds and the value of having the service
available as "a 'backup' plan" for purchases.
Wachovia's
brochure also notes that the service generates no fees
"if it is never used" or if the account-holder
makes a deposit or fund transfer that covers the
overdraft "before the posted cutoff time on the
same business day."
Officials
at
Citizens Bank
say they have been busy since late April explaining to
customers how the new rules may affect them.
Barb Mealmaker
, a Citizens senior vice president, said the bank was
not trying to persuade customers to opt in to what it
calls its Standard Overdraft Practices.
"We're
giving the options and educating them, and letting them
make the decision on their own terms," Mealmaker
said in an interview.
Mealmaker
said some customers welcome the chance to avoid having
to pay the bank's fees for overdrafts:
$22
an item on the first day that a customer goes into the
red each year, and
$37
an item thereafter. "Many of them are very pleased
with that option," she said.
But
Mealmaker said about half of Citizens' customers, both
current account-holders and new ones, were choosing to
opt in to Standard Overdraft Practices. She said many
were worried about having a transaction declined
"with a cartful of groceries, or if they have a car
emergency."
Citizens
and Wachovia, like many other banks, offer other options
for avoiding the largest overdraft fees, such as linking
a checking account to a savings or credit account. And
both say they are reminding customers of tools such as
low-balance alerts, which can be sent to cell phones or
e-mail addresses.
But
advocacy groups such as the
Consumer Federation
, which want tighter restrictions on debit-card
overdrafts, are urging customers to reject the banks'
invitations for what the advocates call "overdraft
loans."
If it
were computed as an annual interest rate, the cost of a
$10
overdraft held for two weeks would range above 900
percent at all of the 15 banks surveyed, and as high as
3,200 percent, the group said. (To see the
Consumer Federation's
survey, go to http://go.philly.com/overdraft.)
"It's
still a very expensive way to get a short-term cash
advance," said
Jean Ann Fox
, of the
Consumer Federation
.
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