Are the overdraft fees over?
A New York Times report on Tuesday (June 22) said a growing number of banks have introduced services such as grace periods and small, short-term loans for qualified customers: those with a consistent deposit history or perhaps a long-term account.
“The biggest shift this month came when Ally Bank said it would completely remove its $ 25 overdraft fee and give customers six days to get back into the black before potentially restricting the use of their accounts.” the report says.
Other banks are moving away from overdraft fees, such as PNC Bank’s âlow cash mode,â which warns customers when their balance falls below $ 50 and again when they go negative.
Overdraft fees are down 10 percent last year, their lowest level in six years, PYMNTS ‘Karen Webster recently wrote. There are several reasons for this decline: Consumers either worked from home or not at all and were not spending as much as they used to. They also saved on travel expenses and other work-related expenses, and were smart about what they didn’t want to spend. And incentive payments and other programs gave people more money than they normally would have.
This change follows decades of proliferation through overdraft fees. The concept was introduced as a convenience for customers: instead of breaking a check, they can be sure that their bills will be paid anyway. However, over time, banks have charged high fees through overdrafts. Customers need to sign up to get this protection, but banks don’t need customer consent to charge online payments or checks instead of bouncing them off.
These fees have become a multi-billion dollar revenue stream “so lucrative for a midsize institution that its chairman named his boat after them,” the Times story said.