Bank of America and Chase Bank both recently announced in press releases that they were changing the way overdraft fees are structured. While this may come as a relief to millions of cardholders who were charged, sometimes exorbitant fees, those in the pre-paid debit world have long enjoyed freedom from worrying about overdrafting their accounts. With standard account-linked debit cards, such as those offered by Bank of America and Chase Bank, the banks were allowing transactions to post to the account that would result in overdrafts in the customer’s debit accounts.
When customer’s debit account balances fell below $0 as the charges posted to their account,
customers were charged. Some banks charge over $25 per overdraft, and would authorize multiple overdrafts in a single day. Obviously, this can add up to a large sum of money.
Prepaid debit cards normally do not carry this same risk of overdrafting an account. The vast majority of pre-paid cards will decline a transaction that would result in the available cash on the card dropping below $0. For most customers, a declined card is vastly preferable to facing potentially hundreds of dollars in fees.
Both Chase Bank and JP Morgan are offering customers limited fees and the option to opt out of allowing their cards to overdraft, but fees still exist. Pre-paid debit users, fortunately, are able to avoid this issue altogether.