Overdraft Fees Are On Their Way Out
New overdraft policies are emerging as consumers and government officials pressure banks to get rid of the fees.
Overdraft fees may eventually become a thing of the past. One large bank, Capital One, recently eliminated them, and Chase has made it easier for customers to fund their account if they overdraw it. Other banks have also eliminated overdraft fees or relaxed their policies, including Bank of America and Wells Fargo.
According to a recent Bankrate study, the average overdraft fee is a whopping $33.58. Banks have historically relied on the fees as a major source of revenue, but making overdraft policies more consumer friendly is a big trend in banking right now, says Ken Tumin, founder of DepositAccounts.com. Banks have been feeling the pressure from consumers and government officials to get rid of the fees. The Consumer Financial Protection Bureau is currently drafting rules outlining when a lender can charge an overdraft fee and will heavily scrutinize firms that rely on such charges. Tumin thinks more big banks will get rid of the fees, while smaller banks and credit unions will modify existing policies. Smaller banks typically need to charge such fees to stay profitable.
While Capital One has gotten rid of overdraft fees altogether, Chase is giving customers who overdraw their account by $50 or less a grace period: They have until the end of the next business day to replace the overdrawn funds without incurring a fee. The fee kicks in if the amount overdrawn is more than $50 or the funds aren’t replaced.
Bank of America will cut its overdraft fee to $10 from $35 for customers starting in May, and Wells Fargo announced a 24-hour grace period to fund overdrawn accounts and the elimination of transfer fees from linked accounts. Internet bank Ally has eliminated overdraft fees. And regional bank Huntington Bank, with branches in 12 states, has implemented a 24-hour grace period.
Meanwhile, if you overdraw your account, call your bank as soon as you notice. It may be willing to waive the fee if you haven’t overdrawn your account before.