Diving Brief:
- Bank of America plans to cut overdraft fees from $35 to $10 starting in May, according to Tuesday press release. It will also eliminate the NSF fee next month and some transfer fees in May.
- Wells Fargo later in the day said it would eliminate NSF fees and transfer fees for certain customers in Q1 2022. The bank also said it plans to provide a 24-hour grace period, beginning in Q3, to customers to cover an overdraft before incurring charges. .
- These moves away from overdraft “increase choice and flexibility and as a result will bring more people into the traditional banking system and away from more expensive options outside of it,” said League President Marc Morial. national urban and member. of the Wells Fargo Banking Inclusion Initiative Task Force.
Overview of the dive:
By moving away from overdraft fees and related fees, Bank of America and Wells Fargo are building on a broader trend in which banks are committing to relying less on overdraft fees and other fees.
Capital One said last month it would eliminate overdraft fees by early 2022 for retail banking customers, becoming the largest U.S. bank to do so.
Ally Bank and Alliant Credit Union eliminated overdraft fees in 2021.
The announcements from Bank of America and Wells Fargo – the second and fourth largest banks in the United States, respectively – come weeks after the Consumer Financial Protection Bureau (CFPB) indicated that the agency would take a stronger stance. harsh on banks that are too dependent on overdraft fees.
Bank of America said it would remove the ability for customers to withdraw their accounts from ATMs in February.
In addition to its planned reduction in overdraft fees in May, the bank announced that it will eliminate the overdraft protection transfer fee of $12 per transaction on its Balance Connect accounts.
“We remain committed to taking action that will further reduce overdraft fees in the future and continue to empower clients to make positive changes in overdraft behavior,” said Holly O’Neill, president of Bank of America retail banking.
Once these changes are implemented, Bank of America will have reduced overdraft fee revenue by 97% from 2009, the Charlotte, North Carolina-based lender said in its statement.
Wells Fargo, also on Tuesday, said it plans in the first quarter to eliminate transfer fees for customers enrolled in the bank’s overdraft protection program and eliminate NSF fees.
The bank has also pledged to give customers access to direct deposits two days earlier, starting in the third quarter, in a bid to help users avoid overdraft fees. Wells Fargo will also unveil a 24-hour grace period for customers who overdraw on their account, the bank said.
At first glance, this may reflect functionality akin to PNC’s “low cash mode,” an offering announced by the Pittsburgh-based lender in April 2021. Citizens Bank also introduced technology in October that alerts users to withdrawals at discovered.
Additionally, Wells Fargo announced that it will launch a new credit product by the end of 2022, offering eligible customers a short-term loan of up to $500, repayable in monthly installments.
The measures, however, avoid eliminating overdraft fees at all levels. JPMorgan Chase last month also promised to extend the bank’s overdraft grace period by one day and provide customers with direct deposit paychecks two days earlier.
Months earlier, JPMorgan raised a threshold so that only overdrawn accounts of $50 or more incur overdraft fees. Santander, similarly, announced in November that its customers will be able to overdraw accounts for up to $100 without incurring overdraft fees.
Even as banks continue to roll out such initiatives, the average cost of overdraft fees has increased by 22 cents in the United States over the past two years, according to a survey conducted by Bankrate.
Banks collected nearly 40% more overdraft fees in the second quarter of 2021 than in the same three-month period a year earlier, S&P Global Market Intelligence reported in August.
