Community banks and credit unions have been praised for their cost-effective, consumer-friendly programs. Now, one large megabank is emulating the practices of smaller institutions by making a significant reform in its overdraft protection program.
JPMorgan Chase announced it will eliminate overdraft fees for debit card purchases of $5 or less. This reform will help consumers avoid getting hit with multiple overdraft fees, which are currently imposed on overdrawn accounts regardless of how small the purchase is.
For example, let's say a consumer has an overdrawn account and has already incurred Chase's $34 overdraft fee. If the same consumer made a $1.50 purchase at their local convenience store and then a $2.00 purchase for a cup of coffee, he or she would incur a fee for each charge under Chase's current rules. Under the new rules, small purchases for less than $5 will not incur a charge.
The new change will go into effect on July 22.
Overdraft privilege programs are designed to help consumers overcome financing shortfalls, not penalize them for short-term difficulties. The fact that some larger banks are finally realizing this fact is a step in the right direction.