New Bill Would Ban Overdraft Fees During Coronavirus Outbreak
Bank overdraft fees have long been a contested issue, but they always become even more so during difficult financial times. Banks normally charge overdraft fees when you overdraw your account. This happens when you make a purchase with your debit card for example (or write a check etc.), and the balance in your account is not enough to cover that purchase. Instead of the purchase being declined, the bank will cover the difference and charge you a fee. These fees vary, but are usually about $20 to $40.
Senators Cory Booker of New Jersey and Sherrod Brown of Ohio introduced a measure in late March that would eliminate overdraft fees during the current pandemic. It would also apply during future presidentially-declared emergencies. For now, the bill would bar banks, credit unions and other financial institutions from charging overdraft fees until the coronavirus crisis is over. They pushed for the bill to be included in the $2 trillion stimulus package, but that didn’t happen.
The reason why these fees are considered unfair is that you can be cgarged more than the money you are actually borrowing from the bank. Additionally you might not be notified right away that your account is overdrawn and will continue being charged this fees for every other purchase. To make matters worse, about 40% of banks also rearrange transaction made on the same day, processing larger transactions first, which results in more overdraft fees. Most banks cap the number of overdraft fees to about 4-6 per day, but some may allow even more than that. So a person who has no money in the account, can potentially be charged $100+ in fees, making a bad situation much worse.
Several banks have already announced that they are stopping overdraft fees due to the current outbreak. Some other banks have stated that they will consider waiving these fees on a case-by-case basis. Banks even do this during normal circumstances, especially if it is the first time being charged an overdraft fee.
The best way to avoid these overdraft fees is to opt out, either when you sing up for a bank account, or later on. That means that you will never pay an overdraft fee, even if you don’t have money in your account. Your card will be declined if there’s not enough to cover a purchase or a withdrawal.