TEXT OF INTERVIEW
Steve Chiotakis: With Congress breathing down their necks, major banks have begun to limit the fees they charge customers for overdrawing their accounts. Bank of America and JP Morgan Chase announced late yesterday they would cap the size and frequency of penalties they impose on overdrafts.
Marketplace’s Washington Bureau Chief, John Dimsdale, joins us live this morning. Morning, John.
John Dimsdale: Good morning, Steve.
Chiotakis: What kind of fees are we talking about?
Dimsdale: Well most banks automatically enroll their customers in what they call overdraft protection plans, which means if you use your credit or debit card to withdrawl more than you have in your account, the bank will cover the transaction but charge you as much as $35 each time. Now that saves you the embarrassment of having your charge rejected at the store, but you may not realize that that $5 cup of coffee just cost you more like $40. So starting October 19, Bank of America won’t charge an overdraft fee if the account goes into the red by less than $10. You’d have five days to bring your account into balance before you get hit with that $35.
Chiotakis: And John, will the banks stop automatically enrolling customers into thsoe overdraft plans?
Dimsdale: Yes, you’ll be able to opt out, which means if you try to charge something beyond the amount in your account, it will be rejected, but you won’t have to pay the $35 fee.
Chiotakis: And one thing that got people really mad was that banks were processing these big transactions first, which brings down the balance into the red and then that causes more overdraft charges. Are they doing anything about that?
Dimsdale: Yes. Chase will get rid of that practice early next year. They’ll process charges chronologically, and that should keep your account in the black longer.
Chiotakis: And of course when one bank does something, others follow, right? So are others going to follow the lead of these two banks?
Dimsdale: That’s right, yeah. The FDIC says three-fourths of all banks have these overdraft policies and others are likely to make similar changes. And that’s a big deal for banks, because they earn close to $40 billion a year in overdraft fees.
Chiotakis: Well if they make so much money on it, why are they doing all this?
Dimsdale: Well like you said, Congress is putting a lot of heat on the banks, threatening to crack down even harder on the overdraft fees. So this is a pre-emptive move by the banks.
Chiotakis: All right. Marketplace’s Washington Bureau Chief, John Dimsdale, joining us live this morning. John, thanks.
Dimsdale: You’re welcome, Steve.
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