Associated Press

As of July 22, JPMorgan Chase will no longer charge its checking account customers overdraft fees for any purchase of $5 or less.

The change will help eliminate multiple overdraft fees — charged when customers overspend their account — for small purchases. Say that you have overdrawn your account and have a negative balance of, oh, $60 (probably incurring an overdraft fee of $34, according to Chase’s checking disclosure). Then you use your debit card to buy a snack for $4.50 and a cup of coffee for $3.50. The new rule means you won’t be charged overdraft fees on the two purchases. Previously, you could have been charged a separate fee for each purchase.

“Good news, we’re making changes to help you avoid fees,” Chase told customers in a recent notice with their statements. “For purchases of $5 or less that overdraw your account, we’ll no longer charge you an insufficient funds fee, returned item fee, or overdraft protection transfer fee.”

The new policy is an addition to the bank’s overdraft policy, which was changed in March 2010 to state that no overdraft fees would be charged if a customer’s overall balance was overdrawn by $5 or less at the close of the business day. Some other banks have similar policies.

But it appears that the additional $5-per-item approach that Chase is adopting is rare among big banks. Jean Ann Fox, director of financial services for the Consumer Federation of America, which recently published a report on overdraft policies at 14 large banks, said the only other bank she knew of with a similar $5-per-item policy is SunTrust. (SunTrust’s online checking disclosure indicates that the bank “will not assess fees on overdraft/returned items that are less than $5.”)

A SunTrust spokesman, Hugh Suhr, elaborated in an e-mail. “SunTrust does not assess overdraft and returned item fees on any transactions that are less than $5,” he wrote. “There is no limit to the number of overdraft items that the fee will not be assessed for, as long as the amount of the transaction is $4.99 or less.”

Chase’s notice to its customers didn’t mention that its latest policy change resulted from settlement negotiations to resolve a class-action suit filed against Chase and other big banks over the way they processed debits and charged overdraft fees. By processing payments in the order from largest to smallest, banks were able to maximize the amount of overdraft fees charged

Chase agreed in February to settle the suit for $110 million. On May 24, a Federal District Court judge in Miami gave preliminary approval to the settlement, and final approval is expected by the end of the year. The settlement noted that Chase agreed to adopt a policy of not charging overdraft fees on debit card transactions of $5 or less and to keep that policy in place for “at least two years.” (Chase’s new policy applies to purchases made with checks, too).

Robert C. Gilbert, one of the lead attorneys for the plaintiffs in the class-action suit, said Chase proposed the change on its own during the settlement talks. “It’s a creative way to help eliminate a lot of complaints from customers,” he said. Bank customers, in general, have been particularly outraged by the so-called “$38 cup of coffee,” the result of overdrawing one’s account by buying a $3 beverage and incurring a $35 overdraft fee.

What do you think of the new policy?