Average overdraft fees down 11% over the past year

More than two dozen Major banks have overhauled their overdraft policies over the past year. While these changes have reduced the average cost of these fees, 96% of checking accounts still charge these fees.

Follow Annual ATM Fees and Checks Study release Wednesday. The most common rate for overdraft fees remains around $35, the same as it has been for the past 13 years.

Average insufficient funds (NSF) fees — similar to overdraft fees and typically assessed when customers overdraft their checking accounts with checks or recurring fees such as rent or bill payments — down 21% compared to last year. These fees hit an average cost of $26.58 this year, the lowest recorded since 2004.

This comes as banks like Citi and Capital One cut overdraft fees entirely, and many more — such as Bank of America, BMO Harris, Bank of America, and Wells Fargo — eliminated NSF fees this year. To date, about 13% of accounts analyzed by Bankrate have eliminated NSF fees and 4% have eliminated overdraft fees.

Overdraft reforms implemented by some banks add real money to consumers; estimated at $4 billion annually, According to research from Pew Charity Trusts.

While some consumers are saving more as larger banks eliminate these fees, These fees are still widely levied. In a survey of 245 financial institutions that offer checking accounts to consumers, Bankrate found that 96% of checking accounts charge an overdraft fee and 87% charge an NSF fee. Bankrate did not analyze checking account fees at credit unions.

One reason for the slow pace of change in the industry: overdrafts and NSF fees are big revenue drivers for financial institutions. In 2021, banks, credit unions, community banks, and fintechs earned an estimated $33.4 billion from these fees, According to economic research firm Moebs Services.

Industry experts also point out that significantly limiting overdraft fees can create more of a challenge than settling for consumers. Overdraft protection offers bank customers a viable source of short-term liquidityand without it, some consumers may be forced to use risky alternatives like short-term loans more often.

“Overdraft remains one of the few short-term consumer liquidity products in the banking system that is tightly regulated and regulated,” said Lindsey Johnson, President and CEO of the Association of Bankers. consumption, wrote in a July op-ed. “Most casual overdraft users intentionally use the product and value the emergency safety net it provides in times of need — whether paying rent or simply putting food on the table .

And while overdraft and NSF fees may have dropped in the last year, Americans are still eyeing elsewhere. The bank noticed that ATM fees had increased. The average combined off-net ATM fee (which includes ATM surcharges and the costs banks charge to their own customers) has increased 1.5% since last year to $4.66 – the highest since 2019.

Consumer advocates and progressive Democrats argue that bank fees are often levied on Americans who can least afford them. And some, including Representatives Carolyn Maloney (DN.Y.) and Senators Cory Booker (DN.J.), and Elizabeth Warren (D-Mass.), wants to at least limit overdraft fees through federal lawalthough their bills are yet to be debated or passed in Parliament.

“I would like to see more banks follow the steps of Capital One, Ally and Citibank and do it voluntarily. But one of those things is voluntarily doing something that they can easily say we’re not going to do it,” Maloney said at a press conference in July. “I think it’s very important to have the fact of the law behind this.”

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