Bank of America to Test Overdraft Texting for Debit Cards

In the not so distant past, last summer in fact, new banking rules were passed that required bank customers to opt in and agree to pay overdraft fees for debit card purchases to be approved if there were insufficient funds to cover the transaction. The banking customers who opted in for this program would also incur a $35 overdraft fee. Those who did not opt in for the service would simply have their debit card purchase declined and no fees were charged.

Even a rule as simple as this seemed to confuse consumers. Most blamed the confusion on how the bank presented it to the customers. Now, at least one bank, Bank of America, may be trying to make up for it with a new service to help its customers.

Text and Choose

In either a quest to be on the cutting edge of technology, or to simply improve customer relations and potentially its bottom line, Bank of America (BOA) will be testing a new program early next year that will text debit cardholders if their card is declined because of insufficient funds. It will be an instant text message, so the customer will receive it while he or she is still standing at the checkout counter.

If the customer agrees to pay the $35 overdraft fee, BOA will allow the transaction to go through. Customers have another option, which allows the transaction to go through, but also helps them to avoid paying the $35 overdraft fee. If they deposit more money into their accounts by 8 p.m. of the day the transaction is made, the $35 overdraft fee goes away too.

If you reject the option of paying the fee, thetransaction simply gets declined and you walk away without the items you were trying to buy.

Jean Ann Fox, the director of financial services for the Consumer Federation of America, urged consumers not to opt in for the overdraft protection when the rules first went into effect, and still urges consumers not to do so today. "The fees can pile up very quickly," she said.

If you are already in the program, it’s good advice to use the overdraft protection feature wisely. Save it for emergency situations. If you are trying to pay for a new pair of Jimmy Choo shoes, that’s probably not a good reason to pay an additional $35 overdraft fee.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.