Much like learning to hold one’s liquor and changing majors, overdrawing on a checking account seems to be a post-adolescent rite of passage

A few weeks ago, banks across the nation were making headlines for increases in overdraft fees. However, some banks are actually making the news for the exact opposite reason.

This past week, Bank of America and J.P. Morgan implemented changes to their overdraft policies. Customers now have the option to opt out of overdraft protection and turn off funds. If the customer does not have the required funds, the card will be declined.  

According to Doug Pearce, a professor of economics and department head, these changes in policy may be a calculated move.

“Congress is debating regulations on bank overdraft fees and policies so my guess is that banks are trying to preempt this threat by lowering fees now,” Pearce said.

Pearce said consumers have filed complaints about overdraft fees and that high fees are popular targets for legislation makers at a time when some banks are seen as the recipients of government bailouts.

John Lapp, economics professor, thinks this is largely a public relations ploy.

“Banks are not popular after the financial crisis and overdraft fees have been unpopular for years,” Lapp said. “The small changes banks have introduced won’t have much effect, but they look good.”

Lapp said banks would like to look like they are helping people cope with the current environment. This makes it look like they are cutting people’s costs.

“Hence, banks think these changes will be popular,” Lapp said.

Lapp said another factor is the threat that Congress may impose restrictions on bank fees. This has become more likely with the recession and the banks may have reduced fees in hopes of forestalling legal restrictions.

Lapp and Pearce said they don’t think the change will have ramifications on a macroeconomic level.

“If banks reduce these fees it will lower their earnings –– and there would likely be other types of fees charged to replace overdraft fees,” Pearce said.

Lapp and Pearce do not recall any previous cuts in fees.

“The trend over the past several decades has been for bank fees to increase,” Lapp said.

A 2008 Federal Deposit Insurance Corporation study revealed that debit card and ATM transactions accounted for a substantial part of the overdraft fees. The study also found that people in the 18-25 age group were hit by fees more frequently than others.

“If you incur these fees by running an overdraft, you are essentially getting credit but at a very high interest rate,” Pearce said. ”You might run an overdraft of $50 and be charged a fee of $25 to $30.”

Congress is proposing that banks require customers to sign up for overdraft protection rather than it being the default option. This way it would be easier for customers to opt out.  This means students would have to pay careful attention to their balances or run the risk of their transaction being denied.  

“In the longer run, if banks charge lower overdraft fees, students may find that they have to pay other fees to maintain an account – for example no ‘free checking’,” Pearce said.

Lapp said some students may escape some fees, but hopes most students are too smart to overdraw their accounts and incur the fees.

“Students tend to be careless about this until they have paid a few fees and then they usually learn quickly,” Lapp said.