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New rule takes aim at overdraft fees at banks: Could it be reduced?

A newly proposed rule aims to significantly reduce bank overdraft fees, which cost millions of Americans billions of dollars annually. Currently, large banks often charge $35 per transaction when account holders spend more than their available balance.

Experts say the proposed rule would lower this fee to around $3 or alternatively offer a short-term line of credit, provided it aligns with existing lending laws. However, this change would only affect 175 of the largest banks, leaving smaller banks and credit unions unaffected.

For customers of smaller banks, experts advise regularly monitoring checking account balances and considering the use of cash to avoid overspending. Many banks offer options to link accounts, allowing automatic transfers from savings to checking accounts to cover overdrafts. Additionally, he suggests that a courteous conversation with customer service can sometimes lead to fee waivers, especially for infrequent occurrences.

The proposed rule, if approved, is expected to take effect on October 1, 2025, offering potential relief to many bank customers from the burden of steep overdraft fees. This development represents a significant shift in banking regulations aimed at protecting consumers from excessive charges.