We’ve previously reported on Chase’s automatic overdraft protection and how they plan to change it to opt-in early next year. What is unclear is whether it is possible to opt-out now. According to this article, they don’t allow customers to opt-out at this time but we have seen other sources that indicate you can opt-out. The one best thing you can do to save yourself money is to call them and try to opt-out of the automatic overdraft protection for debit cards.
Ahead of (and in response to) a bill in Congress that will limit overdraft and other bank fees, Chase and BofA announced overdraft fee and debit policy changes. The changes for Chase include no overdraft if an account is overdrawn by $5 of less and a maximum of 3 overdraft penalties per day instead of 6. They will also start handling debits chronologically rather than lumping them together at the end of the day and processing the largest amounts first. Chages to take effect in the 1st quarter in 2010. The NYT article also claims that Chase will begin allowing people to turn off automatic overdraft protection, although their disclosure statement seems to indicate this is already possible.
Bottom line: it is still possible to rack up significant overdraft fees using a debit card. Chase and other banks need to stop automatically enrolling customers in these overdraft protection schemes. (WSJ & NYT)
Update: according to this LA Times article, Chase will in fact still process the largest charges first, giving you more of a chance of an overdraft. The article also says Chase is switching to opt-in for overdraft protection, but doesn’t say what will happen to existing accounts (i.e. will they turn it off if you never asked for it in the first place).
A story in yesterday’s NPR Marketplace claims that banks are racheting up debit card fees to make up for lost revenue from credit card fees. Among the big fee generators is overdraft protection, something that comes enabled for most new checking acocunts and generates about $38 Billion a year for banks. The story also claims that many banks do not allow you to turn off overdraft protection. According to Chase’s checking account disclosure, you CAN turn it off but you must visit a branch or put the request in writing. Our most important tip to Chase customers is TURN OFF AUTOMATIC OVERDRAFT PROTECTION! It will bit you sooner or later.
S0me of the new rules as part of the Credit Card Act of 2009 are now in effect (8/20/09): Banks must mail statements at least 21 days before their due dates and must give you at least 45 days notice before any significant changes to rates or fees. (WSJ article)
There is no question in my mind, banks are pissed at regulators and customers for throwing a wrench into their profit making machines, and they are taking it out on us. If you’ve seen the secret history of the credit card, you know that the banking and credit card industry engineered their profit machine by setting people up to fail with things like higher credit than they deserved, monthly payments that were far too low, racheting up interest rates for any (and often no) reason, and automatic overdraft protection that generates tons of overdraft fees. Now the government has tightened regulations through the Feds new rules and the Credit Card Reform Act of 2009 which outlaws many of these practices and they are further discussing the overdraft issue, and consumers are defaulting at record rates.
Banks are pissed as the era of easy money is quickly fading into history. I recently received a notice form Bank of America that my account was switching from a fixed rate of 9.9% fo a variable rate that is also currently 9.9%. Sounds the same but this is also a trick, as the prime rate the variable rate is based on is historically low at 3.25%, meaning that my rate will average much higher over the next decade. They are doing this to me, a good customer, with perfect credit, a perfect payment history, and I use my credit cards a lot. They claim they are doing this to all their accounts.
Perhaps it is time to start paying for things with cash again. Merchants will thank you, as it saves them 3%. For businesses like a grocery store, which has net margins of about 1%, this can make a HUGE difference.
Banks need to be taught a lesson, the time of easy money and abusing customers is gone. It is time they started behaving like the revered institutions they once were again.
As evidenced by many recent headlines as well as this Marketplace story, all banks seem to be trying to squeeze as much money from their credit card customers to make up for rising delinquencies. Excuses for raising rates to sky-high levels are getting pretty thin and hard to believe. Getting your rates jacked up to 30% because you were late on one payment even for good reason is commonplace and most credit card companies are guilty of other sleazy practices, such as applying payments to the lowest interest rate debt (even if it is the newest) and applying interest to already paid balances.
President Obama is meeting with credit card executives today to try and convince them to become more reasonable lest they get new regulation shoved down their throats by Congress. The Federal Reserve has already instituted new rules back in December 2008, which covers banks regulsted by them. These rules don’t take effect until July 2010. At this point, relief seems certain, but it will take a year or more to take effect.
Even if regulation does fix some of the problems, new rules may not apply to what banks have already done and banks will probably figure out new and creative ways to ding customers. Consumers must learn to be as active as possible in dealing with fee agressive banks.
If you feel that you have been treated unfairly, I urge you to contact your bank and ask them to be more reasonable. If the person you are talking says they can’t do anything, ask for a manager. If the manager won’t do anything, ask for their manager. If they won’t transfer you to a manager, call back and try again. Contact the company’s customer satisfaction department. File a complaint with the BBB, your states department of consumer affairs, or the organization that regulates your bank. Write letters in addition to calling them on the phone. Find online venues where you can post your complaints. Set up your own complaint website like I did. Write your congressperson. Read your bill and make sure it is correct. Read the fine print on your credit card agreement and see if you can find where they are breaking it.
The more that people refuse to be taken advantage of the less leeway it gives organizations to take advantage of us.
This recent story of a WaMu customer trying desperately to work out a deal to be able to pay off their credit card debt despite losing their job and difficult financial times begs a serious question: are the high credit card rates themselves making their customers unable to pay the debt? I recall an interesting article from 2007 about a credit union in Florida that offered the same low mortgage rates to its prime and sub-prime borrowers and their was virtually no difference in default rates between the two – they were both low. Is it possible that it is the jacking up of interest rates and the unwillingness to make reasonable deals with customers in trouble that is causing customers to default on their debt, not other factors like the losing of jobs? Do credit card issuers really think that jacking someone’s rates up to 28.8% is going to allow them to recover more money than giving them a reasonable rate like 10% and allowing them to pay it off?
Perhaps the credit card issuers like WaMu should consider lowering rates to more reasonable levels to stave off the tidal wave of bad debt coming their way. I think they banking industry’s theory that higher rates for riskier customers protects them against the higher risk is a flawed one.
Just my opinion.
Christy writes:
“After a few years as a customer of Washington Mutual, it was finally explained to me how they operate. This information would have been useful as I sat down to open the account.
They say that as long as your account is positive by the end of the day, there is no overdraft charge.
After knowing that a deposit was being put into the my account same day, my account was showing negative for a few transactions. After the deposit was added to the account, the account showed a positive balance when checked at 11:00 pm. I have also signed up for an e-mail alert that will notify me when my account is below a specified amount.
Apparently, they process their books between 11pm and 6am and THEN send out the e-mail notification of account balance. (I’m still not sure how that helps me, the customer, in regards to the activity that took place between 11pm and 12am that caused Washington Mutual to charge $130 in overdraft charges.
They informed me that although my account was positive at 11pm, they process outstanding transactions after 11pm, which caused them to charge an overdraft fee on the $10 subway (DEBIT transaction from a week ago) and they also charge an overdraft fee on any transaction during that day that had a negative balance, regardless of whether my account was positive prior to the last transaction.
Imagine my surprise when I received and e-mail notification at 9am THIS MORNING for a negative balance of $140 (4 x $32 in overdraft, plus my subway).
I don’t see how any of this protects the customer.”
Fees & charges | admin October 21, 2009 | 
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