In the past, if you tried to withdraw more money than you had in an account or made a debit card purchase with insufficient funds, a bank could charge hefty overdraft fees regardless of the charge amount and without a full explanation. Some consumers found themselves paying $10-$20 charges for an overdraft of a dollar or less. And the fees proved to be quite profitable; in 2009, banks made approximately $32 billion from charging consumers overdraft fees on debit card purchases, ATM withdrawals, and personal checks.
Starting July 1, 2010, however, new federal rules change to the way banks charge overdraft fees. The main change coming from the Federal Reserve Board requires banks to allow customers to opt out of overdraft protection—and clearly outline any fees associated with continuing overdraft coverage. This includes fees for ATM transactions as well as debit card purchases. Previously, customers were often automatically enrolled in banks’ overdraft protection program. In most cases, if you opt out of overdraft protection, the bank won’t honor your purchase and your card will be rejected, but you also won’t incur a $20 overdraft fee for a $2 cup of coffee.
In March 2010, Bank of America got rid of overdraft fees associated with its customers’ debit card purchases. Now, if a BofA customer tries to make a debit card purchase without sufficient funds, the card will be declined and an overdraft fee will not be charged. At a BofA ATM, a customer will have to actively agree to a $35 overdraft fee before receiving cash that’s, well, not in the account.
For more info:
Federal Reserve Board’s New Rule (PDF)
Office of the Comptroller of the Currency – “Answers About Overdraft Fees and Protection”