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New Debit Card Overdraft Fees: Simpler, but Still Expensive

June 29, 2010

By Barbara Marquand | Money Rates Columnist

There's good news and bad news for consumers as banks comply with new Federal Reserve rules for overdraft fees.

The good news: Banks are simplifying their complicated overdraft fee structures, according to a June survey of the 15 largest banks by the Consumer Federation of America.

The bad news: Many are eliminating their lowest fees. The consumer group says Chase, Citizens/RBS, Regions, and US Bank have collapsed or done away with tiered fees. Chase, which used to charge $25 to $35, now charges a flat $34 overdraft fee. Wells Fargo eliminated its initial $25 fee and now charges $35 for every overdraft. The only big drop in fees was at US Bank, which cut its fee to $10 for overdrafts of $20 or less. Larger overdrafts cost $33. Previously, US Bank charged tiered fees of $19 to $37.50 each.

Checking Account Overdraft Fee Still High

The typical checking account overdraft fee still runs about $35 at big banks, with top fees ranging from $33 at US Bank to $37 at Citizens/RBS and Fifth Third Bank, according to Consumer Federation.

A few major banks -- Bank of America, Citibank and USAA -- have decided not to let their customers overdraw their accounts at the ATM or cash register. Chase doesn't allow overdrafts at the ATM, but it's marketing its debit card purchase overdraft coverage, Consumer Federation said.

The first phase of the new Federal Reserve rules go into effect in July when banks must get permission from new accountholders to charge overdraft fees on debit card purchases and ATM withdrawals. Starting August 15, they must get permission from current accountholders to charge overdraft fees on those transactions.

Beware that banks can still charge overdraft fees for checks, preauthorized electronic payments, and recurring debit card transactions without your permission.

If you want overdraft protection without big fees, ask your bank about linking your savings account to your checking account to cover overdrafts.

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