Bank of America announced this week that it is officially planning to cut overdraft fees to $10 from $35 beginning in May 2022. The bank will also eliminate non-sufficient fund fees altogether. This could happen as soon as February 2022.
CNBC reports that in a statement, Bank of America’s President of Retail Banking, Holly O’Neill, spoke about the new plans. “These latest steps fill further support our clients and empower them to create long-term financial wellness.”
The Bank of America employee says the bank remains committed to taking action. Which will further bring down overdraft fees in the future. It also wants to continue to empower clients to drive positive changes to behavior pertaining to overdraft.
Greg McBride, the Chief Financial Analyst of Bankrate.com, spoke to CNBC about the importance of lowering overdraft fees. “Reducing the overdraft from $35 to $10 blazes a trail for other banks to follow. Don’t be surprised if this unleashes a parade of similar announcements in the weeks ahead.”
CNBC also reports that Ally Bank announced last year its plans to ditch fees and Capital One revealed that it would actually eliminate all overdraft fees for retail banking customers. This was to start in 2022. The media outlet then adds that the average penalty for overdrafting hit a record high of $33.47 in 2020. In 2021, American consumers ended up paying more than $12 billion in fees for both bounced checks and overdrafts.
Capital One Senior Vice President Discusses the Important of Eliminating Overdraft Fees
During a recent interview with NPR, Capital One Senior Vice President, Peter Boyer discusses why the bank decided to eliminate overdraft fees. “We’re the sixth-largest retail bank in the U.S. and this will affect every checking customer that we have.”
Boyer also states that Capital One’s millions of customers who already have what’s known as overdraft fee protection will keep getting it. But it will be free instead. “We recognize that customers have unexpected expenses and needs at times where their cash flows don’t quite line up between expenses and income. We really want to get our customers to a place where they’re living healthy financial lives.”
However, by ending the overdraft fees, banks like Capital One will reportedly be taking a hit. Boyer explained, “On an annual basis, Capital One is going to forego about $150 million.”
Lauren Saunders, who notably sits on an unpaid consumer advisory board for Capital, tells the media outlet that the bank probably makes more from the overdraft fees than many other banks. This is because it has a lot of customers living paycheck to paycheck. Basically, she believes if Capital One can eliminate the fees then other banks can afford to do the same.