Bank of America and Wells Fargo have joined the ranks of eliminating overdraft penalties, though they haven’t gone all out.
The No. 2 and No. 3 U.S. banks announced in January that they would waive steep penalties for customers on overdraft fees, but unlike what other U.S. banks have done in 2021, they are not eliminating them entirely.
Bank of America slashed overdraft fees from $35 to $10, making it the first of the Big Four U.S. banks (JPMorgan Chase, Bank of America, Wells Fargo and Citibank) to reduce extremely high overdraft penalties. It also announced its intention to lower refund fees.
Wells Fargo has followed suit, announcing that it will give customers 24 hours to cover overdraft and negative balance accounts before charging such fees. It is removing the $35 penalty on returned items due to insufficient funds, but has not made concessions on the $35 overdraft penalty.
Bank of America’s action plan began in May. Wells Fargo’s new rules will take effect in the third quarter of 2022.
Bank of America will also no longer let customers overdraft their accounts from ATMs and remove the $12 penalty for using overdraft protection to move funds from one account to another to avoid “bounced checks.”
While consumer check writing has steadily declined, automatic debits, such as those often required by utilities, can leave accounts with negative balances without customers knowing.
“This is the final step in our journey,” Holly O’Neill, president of Bank of America retail banking, told The Associated Press. “We provide our clients with a good financial solution where they don’t have to rely on overdrafts, but we still do overdrafts if needed.”
These changes are unlikely to come from the goodness of their banking. During the pandemic, the banking industry has come under fire from the Consumer Financial Protection Bureau (CFPC) and other regulators for the huge sums it makes from fines, especially from the unemployed.
JPMorgan, Wells Fargo and Bank of America, according to CFPB, which accounted for 44% of the $15.47 billion in overdraft income collected in 2019.
Trends in cutting overdraft penalties
Capital One, one of the top ten banks in the United States, Cancellation of overdraft fees December 2021.
Capital One may still incur overdrafts, but customers will not be charged. Customers can also opt for Capital One’s overdraft protection plan with no service fee.
Online banking giant Ally Bank hits headlines in summer 2021 cancel its overdraft fee, followed by Alliant Credit Union, another major financial institution.
What differentiates Capital One, Bank of America and Wells Fargo from Ally and Alliant, however, is their sheer size.
Capital One is the sixth largest retail bank in the US, and in just one month, it was the only bank in the top 10 to eliminate overdraft and underfunding fees. Then Bank of America and Wells Fargo made their announcements.
Cancelling overdraft fees is just one of them Banking Trends Stay tuned in 2022.
Banks and credit unions that don’t charge overdraft fees
These eight financial institutions—banks, credit unions, and cash management services—have no overdraft fees:
*Fidelity accounts are cash management accounts that are slightly different from traditional checking accounts and are designed for those who use Fidelity Investing. Betterment is also a cash management service that offers investment plans and mobile-first checking accounts.
**KeyBank’s overdraft protection on its Worry-Free Account resulted in the transaction being rejected. No fees are charged, but refusal to pay fees like rent and utilities can still result in late payment fees for those struggling financially.
Kent McDill is a veteran journalist who has focused on personal finance topics since 2013. He is a contributor to The Penny Hoarder. Reporting by Penny Hoarder contributor Timothy Moore is included in this report.