In a trend that started last year, Bank of America is the latest bank to jump on the slash overdraft fees bandwagon. This week, the bank said it would cut overdraft fees from $35 to only $10.
Overdraft fees are usually incurred by repeat offenders. For those customers, overdraft fees usually go into the hundreds of dollars per year per customer. Overdraft fees are also a sizeable source of revenue for banks at an estimated $14 billion in 2019.
Customers using debit cards can incur overdraft fees by not having sufficient funds in their accounts. Like a check, a debit card can still allow the transaction to go through without funds being available to cover it.
Bank of America plans to eliminate bounced check fees. Bounced check fees are also known as non-sufficient funds (NSF) fees. Bounced check fees are incurred when a transaction is rejected, usually because funds are not available to cover the transaction. While it is less common for customers to write checks, they can incur NSF fees through automated bill payments.
Reducing or eliminating overdraft fees is a growing trend. In December, Capital One said it would eliminate overdraft and NSF fees— a move that will cost the bank ~$150 million in revenue. Capital One was charging customers $35 per overdraft transaction, up to $140 per day. In August 2021, it capped overdraft fees at $35 per day (one overdraft transaction) and eliminated NSF fees.
Capital One deals with continued overdrafts by allowing customers to enroll in its overdraft program. Those who do not enroll will simply have any overdraft transactions declined.
In June of 2021, Ally Bank said it would eliminate overdraft fees.
JPMorgan and Wells Fargo have yet to announce any plans to reduce or eliminate overdraft fees. Although JPMorgan did end NSF fees.
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