New proposed rule would reduce bank overdraft fees

MARCELLUS, N.Y. (WSYR-TV) — Overdraft fees cost tens of millions of Americans billions of dollars each year, but a new proposed rule aims to close the loophole that allows it to happen.

Drowning in overdraft fees every time you spend more money than you have in your account can be a nightmare.

“If you have $100 in your account and you charge $120, that would be negative $120 and the bank is going to front that so they don’t bounce your payment,” said Dave Haahr, Certified Financial Planner for Reagan Companies in Marcellus.

And those fees sure add up. Large banks typically charge $35 per transaction. But a proposed rule is looking to help change that, introduced by the Consumer Financial Protection Bureau.

“They want to reduce it down to $3 or if it’s not a reduced fee, maybe doing something where they do some sort of short-term line of credit,” said Haahr.

Providing a loan to its customers if it complies with existing lending law. However, the new rule would only apply to 175 of the largest banks.

“So your small banks, your credit unions, this rule won’t even affect them,” said Haahr.

So, what can small bank customers do to avoid overdraft fees? Start by keeping tabs on your checking account balance.

“If it gets low, maybe then you start switching over to just using cash because if you are using cash, you can’t overspend that,” said Haahr.

And always check with your bank.

“Sometimes they’ll link it to a savings account or a money market account. So if you overdraft it will automatically switch money back over to your checking account to cover that charge,” said Haahr.

Sometimes all it takes is a phone call to resolve a fee.

“If you call the customer service person and be nice and explain the situation, a lot of times they will waive that fee for you. Obviously, if you are doing it every month they are probably not going to be very nice about that,” said Haahr.

If the proposed rule on overdraft fees is passed, it will likely go into effect on Oct.1, 2025.

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