|March 10, 2010|
|Bank of America Earns Some Good PR for a Change|
|By Kevin McCauley|
|U.S. taxpayer-bailed-out Bank of America has taken its share of lumps on the reputation front surrounding its participation in the global financial meltdown, its controversial acquisition of Merrill Lynch, removal of CEO Ken Lewis and the subsequent fraud charges filed against Lewis and chief financial officer Joseph Price by New York Attorney General Andrew Cuomo. |
That's why it's so refreshing to see some positive developments of the PR front for the Charlotte-based banking giant.
With great fanfare, BoA officially announced today that it is ditching overdraft fees on debit cards, the bane of parents everywhere with college kids on a budget.
BoA's move will bring to an end the era of the $40 cup of coffee (e.g., $5 for Starbucks, $35 in overdraft fees for the bank). Overdraft fees represent a nice chunk of change for U.S. banks.
The New York Times reports that debit purchases account for about 60 percent of overdrafts at BoA. Moebs Services, an economic research house, says banks "earned" $20B in overdraft fees on debit cards last year.
Those charges fuel the wrath of people angered with being nickel-and-dimed by their banks. Actually, those people would prefer nickels and dimes rather than $35 penalty fees.
In its release, BoA claims to be putting an end to overdraft fees to "provide more control, choice and clarity for its customers." Customers will have the option of overdraft protection.
Susan Faulkner, deposit and card product executive, believes killing overdraft fees will help "customers control their finances by reducing the possibility of over-extending themselves at the point of sale with a debit card."
Beginning this summer, BoA will decline attempts by customers to buy a product/service with a debit card if they don't have enough money in a checking account to cover the purchase. And that's the rub.
New banking rules require banks to get a customer okay for overdraft fees. That rule goes into effect on July 1, which means BoA's “blockbuster” announcement is less so. The bank is just positioning for the new Federal Reserve rules. That said, BoA is the first major bank to drop overdraft fees. You can bet competitors will follow. BoA earns a PR halo for a change.
NB: BoA customers must remain vigilant on debit card use. Your bank has the entire spring, which begins in two weeks, to collect those overdraft charges.
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