Thursday, March 11, 2010

Bank of America's Overdraft Announcement is Great PR

Yesterday, Bank of America announced its intention to end its overdraft fees on debit and ATM transactions beginning this summer. Instead of being assessed a fee, the transaction will be denied unless a customers wants to opt-in to overdraft protection. The advertisement in today's Wall Street Journal positions the decision as a way to help customers from overdrawing their accounts and to provide more control and choice for their customers.

The problem is, Bank of America isn't doing anything that isn't already required by the Federal Reserve. They are just avoiding the cost of communicating with all of its customers to ask them to opt-in (at least for now). Excuse me if I don't believe that they will just walk away from millions of dollars in OD fee income.

In fact, I suspect customers will soon be confronted by messages on ATMs and discussions in branches to encourage them to opt-in much like all other banks are doing. There may even be a program to automatically offer a line of credit 'advance' if a person is about to overdraw their account at an ATM or at a retail POS location. Much like a credit card overdraft, the transaction could be interrupted by the opportunity for a customer service call where a representative offers a small line of credit to allow the purchase to continue as desired.

And there would still be a fee for every transfer made between linked accounts or from the reserve account.

Credit Bank of America for a very well timed public relations announcement, especially in light of the poor communication done by Chase Bank in some of their opt-in mailings. But be careful to give too much credit when the goals of Bank of America at the end of the day appear to be similar to most other banks. And expect most competing institutions (except Citi where there are no overdrafts) to begin to tout 'choice' as their response to Bank of America automatically opting-out all customers.