I was reading an article in the NY Times last and saw something that will affect us. Some of the larger banks announced that they are lowering their overdraft fees. This is something we’ll keep in mind as we bank with Wachovia (bought by Wells Fargo).

Why are the banks lowering their overdraft fees?

NY Times reports that:
The moves come as lawmakers and regulators in Washington push proposals to reform what critics say are excessive charges of which consumers are unaware. The penalties, known as overdraft fees, bring the banking industry tens of billions of dollars in revenue annually.

What does this mean for you?

Bank of America and Chase will give customers an option to get out of overdraft protection. NY Times also reports the new overdraft fees will be much lower.
Chase and Wells Fargo will cancel fees for accounts overdrawn by $5 or less, according to separate statements. Bank of America will end fees on accounts that are short $10 or less, it said in a statement.
My personal feeling is banks have to come up with some way to make money, so expect some other fees. If you automate your income and expenses, you can avoid these fees in the first place.

Try online banks as a alternative or supplement

For some people this is a bit of too little, too late. If you want to lower fees and better customer service, look at some of the online banks, like ING Direct. They can offer features that can be a huge improvement over some brick and mortar banks.

Here what I personally like about ING’s Electric Orange checking account:

  • No fees. There’s no minimum balance on the account.
  • If the money is not in the account, they won’t pay the bill.
  • Earn real interest.

Even if you don’t use it as your main bank, you may have your savings account over there to test the waters. That’s what we did when we tried ING Direct out.

There are several other high interest savings accounts, if you are looking for other options. Don’t forget to check out their current rates. Just open an account somewhere that you feel comfortable, won’t get feed for everything, and can grow your money.

What do you think? Will lower overdraft fees affect your choice in banking?