Currently, customers enrolled in overdraft protection who have already overdrawn their account and make additional purchases are hit with a $34 fee per purchase, no matter how small the transaction. And they can get hit with overdraft fees as many as three times a day -- adding up to a total of $108 per day.
But starting July 22, this will no longer be the case. Any charge under $5 will not spark an overdraft fee -- no matter how many of these small-dollar transactions you make.
"Good news, we're making changes to help you avoid fees," Chase (JPM, Fortune 500) told its checking account customers in their statements this month.
The decision wasn't a spontaneous act of charity on Chase's part, however. It's part of a $110 million class action lawsuit settlement the bank agreed to earlier this year in order to resolve claims that it was charging excessive overdraft fees to consumers, according to court documents.
Overdraft fees, particularly on small purchases are just a way for banks to take money from people that already do not have the funds in the first place. If these fees are applied to something small like a drink at a convenience store or something then that drink which would have cost something like a dollar suddenly becomes a thirty five dollar drink or something similar. I believe that there should be some kind of system to reject a purchase when there aren't available funds in the individuals bank account.
Banks should not eliminate overdraft fees for small purchases because if they did that for everyone, it would add up and the bank would lose money. This would result in less desirable banks for consumers. Additionally, doing that does not promote responsibility. If one is going to spend money, s/he should make sure they have enough in the bank first.
It is the responsibility of the account holder to know how much money is in their account to and spend accordingly. The bank is within reason to charges fees to people who spend more money than is in their accounts. Fees are disclosed as the time of account opening so the accout holder is not unaware of them.