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Consumers may be well acquainted with the concept of overdraft protection when writing checks, but early Monday Discover Financial Services said it is extending the service to its debit cards.
Cardholders who hold the company’s Cashback Debit Checking account are eligible for the new service, called Balance+. “With Balance+ we are giving our customers peace of mind that Discover has their back when they use their debit card for their everyday necessities,” Ram Subramanian, vice president and chief marketing officer of Discover Bank, says in a statement.
Overdraft fees typically range from $10 to $40, with an average of $35, according to information from Smartasset.com.
Accountholders can overdraw up to $200 on debit card transactions and incur no fee, Discover says, though the account must be in “good standing” and involve a balance of more than zero. Account holders must also have received one direct deposit of $200 or more over the past two calendar months, Discover says. The new program adds to the company’s existing Overdraft Protection service, which covers checks, online bill payments, and automated clearing house transfers.
Expert observers see the new program as a means by which Discover can distinguish its banking services and its debit card as banking competition gets hotter, particularly in the middle-class demographic the company has long served. “It’s just a differentiator. Discover sees it playing to their demographic, people who live paycheck-to-paycheck and need a little boost,” says Savannah, Ga.-based payments consultant Patricia Hewitt.
Still, she questions the program’s staying power, particularly as more cardholders take advantage of it and especially if the economy takes a downturn. “This is a low-to-middle-income, skirting to near-prime, demographic,” she notes, adding the new program “gives other banks the opportunity to compete for that demographic. We’ll see if it gets quietly buried six months from now.”
A Discover spokesperson did not immediately return a call from Digital Transactions News about the new program.
The Consumer Financial Protection Bureau in January indicated it planned to develop a regulation for bank overdraft fees, which it said at the time averaged $35. The regulation would apply to banks with assets of $10 billion or more, the regulator said at the time.
The new debit card program comes as Discover negotiates a massive merger with banking giant Capital One Corp., whose $35-billion bid for the card and banking company stunned the payments industry early this year.
Riverwoods, Ill.-based Discover owns Discover Bank, which until 2000 was known as The Greenwood Trust Co.
