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Chase’s New Overdraft Policy - Potential Gotchas for Customers


Chase has announced a change to their overdraft protection service. At first glance, the change may look like it will reduce fees for most Chase checking account customers. The change may reduce overdraft fees, but many customers may be hit with more fees from their Chase savings accounts.

Here’s an overview of the overdraft policy changes that Chase provided:

Chase Overdraft Policy Changes

The first potential gotcha will be Chase checking account customers who don’t have a Chase savings account and are using their Chase credit card as the backup funding account. If they don’t open a savings account, overdrafts may result in declined transactions and nonsufficient funds (NSF) fees.

A less obvious gotcha may hit customers who do have Chase savings accounts.

A federal regulation limits certain types of withdrawals from savings accounts to six per month, and that includes automatic overdraft transfers. For this reason, banks generally charge a fee for each transfer that occurs after the sixth transfer. In the case of Chase, this fee is called the Savings Withdrawal Limit Fee, and it’s currently $5 per withdrawal.

One important feature of this overdraft policy change that increases the likelihood of customers being hit with the Savings Withdrawal Limit Fee is the amount that will be transferred from the savings to checking account. Currently, automatic transfers are generally in $50 increments. After the overdraft policy change, the exact amount needed to cover the transaction will be transferred. Thus, small checking account withdrawals, like everyday debit card transactions, will likely trigger more overdraft transfers.

One important feature of this overdraft policy change that increases the likelihood of customers being hit with the Savings Withdrawal Limit Fee is the amount that will be transferred from the savings to checking account.

Here’s an example of how this overdraft policy change may trigger more overdraft transfers, and thus, more Savings Withdrawal Limit Fees. Under the current policy, if a debit card purchase of $10 triggers an overdraft, a $50 transfer from the savings to checking account will provide a balance of up to $40 in the checking account. This provides a small cushion for additional purchases. If additional small debit card purchases are made, no overdraft transfer will be necessary. Under the new overdraft policy, each debit card purchase may trigger an overdraft transfer which may quickly add up to over six.

A better policy for customers would be if the bank declines everyday debit card transactions that would cause an overdraft transfer even if the customer has overdraft protection.

Chase actually has two types of overdraft policies. One is called Overdraft Protection and the other is called Chase Debit Card Coverage which covers everyday debit card transactions. As required by federal regulation, banks cannot charge fees for everyday debit card overdrafts unless you have opted in to consent to fees on these types of transactions.

A Chase customer may have chosen not to opt in to debit card coverage so that everyday debit card transactions will be declined if there isn’t enough money in the checking account to cover the transaction. However, if the customer chose overdraft protection to avoid returned checks, the overdraft protection will also be applied to everyday debit card transactions even if the customer didn’t opt in to debit card coverage.

With the new Chase overdraft policy, everyday debit card transactions may cause many overdraft transfers from the savings account. This is due to the fact that under the new policy, the exact amount needed to cover the transaction will be transferred. The higher number of overdraft transfers will make it more likely that the customer will exceed the limit of withdrawals allowed from the savings account which will cause a fee for each withdrawal.

The Bottom Line

The overdraft policy change at Chase should help some customers. The removal of the overdraft transfer fee is a nice change. However, Chase checking account customers shouldn’t depend on overdraft transfers especially if they are active debit card users. Under the new overdraft policy, active debit card users may still end up paying fees.

Free overdraft transfers can sometimes not only save consumers fees, but also allow consumers to earn more interest. This requires that the savings account have an interest rate that’s high enough that it’s worthwhile to maintain a large savings account balance and a small checking account balance. That’s not the case for Chase where the standard savings account has a very low interest rate (currently 0.01%).

Anonymous   |     |   Comment #1
Why would anyone that is a "regular" on DA have any overdraft protection?  Either I can't manage my check book OR someone forged my signature OR ....   In any event I instruct my bank to refuse to honor any overdraft!  I'll gladly "initially" pay a fee but Chase will be sued for honoring any forged signatures!
Anonymous   |     |   Comment #2
PNC bank has even worst sneaky fees, they call it courtesy pay, what they do is pay the shortfall and wait for you to pay it back within 24 hours, if the overdraft is not paid in 24 hours and even if you do not have overdraft agreement with the bank the fees kick in.
You can not opt out of courtesy pay and fee agreement it is under account agreement under discretionary pays.
I closed all of my accounts with them because of that courtesy trap.
Anonymous   |     |   Comment #3
Banks are a business just like any other.....They can charge whatever fee they want and have every right to make a profit. If you whiners don't like it then start your own bank.
Anonymous   |     |   Comment #4
How is this a "gotcha"???????   It's pretty clear what is needed-a savings account. Or.......Here's a thought......HAVE ENOUGH FUNDS IN YOUR ACCOUNT TO COVER YOUR DEBITS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!  It's not that hard, people. Stop whining and making excuses for your failures. I have never once in my life had an overdraft fee.
Anonymous   |     |   Comment #5
No risk, no gain
Anonymous   |     |   Comment #7
The bank costs per customer per year is about $300 to maintain it and keep it open.
If there are not ignorant and absent minded customer to pay for your account maintenance fee, it will cost you $25 per month in maintenance fees, it is as simple as that.
D.   |     |   Comment #9
Well aren't you lucky. Life is just that simple for you.
CC in CA
CC in CA   |     |   Comment #6
I miss WAMU!  I closed all of my Chase accounts and moved my money to credit union(s).  Chase was OK, considering they are comparable to other big banks these days, but I simply didn't want to keep hassling with requirements to avoid fees (minimum balance, direct deposit, etc.).  No thank you...  it's credit unions for my REAL money.
Y   |     |   Comment #8
I see why you are anonymous,bad things happen to good people. Keep living you will have your day
Vtech   |     |   Comment #10
Regardless of what banks charge, they are still using the customer's money to do other business with, and make loads of money loaning it out again. You, as a customer are allowing a bank to use your hard earned money. And they hardly if ever pay you for using it. They shouldn't be charging you anything at all unless it is a blatant misappropriation of your doing.
#11 - This comment has been removed for violating our comment policy.