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Attention, Chase customers: The bank is making some changes to its overdraft protection policy.
Starting August 20, customers will no longer be able to cover overdrafts with a linked Chase credit card should they (accidentally) spend more than what’s in their checking account. Only savings accounts will be used as designated back-up funds.
Previously, customers could link either type of account and have overdrafts covered for a $10 transfer fee.
The good news is that the $10 transfer fee is going away. And the exact amount needed to cover the transaction will be transferred, according to the bank’s website. Previously, Chase transferred funds in $50 increments.
On the flip side, Chase checking account holders without a savings account could face declined transactions, insufficient funds and returned item fees, if they don’t note and react to the change. The bank is in the process of notifying customers.
Chase currently charges $34 per overdraft.
“We’re simplifying overdraft to help customers avoid fees and interest,” a spokesperson for the bank told Credit.com. For instance, when you overdraw a savings account you won’t have to pay interest on the charges as you would if your overdrafts were linked to a credit card or line of credit.
The bank also said most customers enrolled in overdraft protection have their checking accounts tied to a savings account, and that, in a six-month period, only 1.5% of overdraft protections went to a credit card.
Banks are currently prohibited from automatically enrolling customers in various forms of overdraft coverage (the modus operandi prior to Dodd-Frank legislation in 2008). Instead, customers must opt into the service, which covers electronic payments, purchases or withdrawals that exceed the available balance in their checking accounts, typically for a high fee.
Cutting your credit card out of the equation isn’t the worst thing in the world, especially if you’re using it to cover purchases you don’t have money to make. However, if you do have a credit card covering your checking account, which some other banks still allow, you’ll want to monitor statements closely to make sure you keep track of charges and know when the balance is due.
Missing a credit card payment won’t just hurt your wallet but also your credit score. (You can see how late payments affect your credit by viewing your free credit report summary, updated every 14 days, on Credit.com.)
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