Capital One has eliminated overdraft fees and underfunding fees for all consumer bank customers, making it the first major bank in the United States to do so.
It has joined the list of seven other small financial institutions that have waived overdraft fees. The question now is, will more big banks follow suit?
Capital One no longer charges overdraft fees
Capital One is not the first bank or credit union to abolish overdraft fees, and such fines will disproportionately affect People who can’t afford it.
Earlier this year, online banking giant Ally Bank became Cancel overdraft feesAnd Alliant Credit Union, another major financial institution, followed closely behind.
However, Capital One is different from Ally and Alliant because of its large scale. Capital One is the sixth largest retail bank in the United States and the only bank in the top 10 that eliminates overdraft and underfunding charges.
3 of the top 10 banks, according to Consumer Financial Protection Bureau, Accounting for 44% of the US$15.47 billion in overdraft revenue in 2019. The three banks are JPMorgan Chase, Wells Fargo and Bank of America.
Why change?
“This is an important mission moment for Capital One. We made this choice to help our customers succeed. In the process, we are revolutionizing the banking industry,” said Richard, founder and CEO of Capital One De Fairbank (Richard Fairbank) wrote in a memo sent to “All Capital One Associates” on December 1. The memo was provided to The Penny Hoarder by Capital One’s public relations department.
Capital One According to the report, this will cause the bank’s annual revenue loss to exceed $150 million.
“For many years, we have been going our own way,” Fairbank wrote in a letter to employees. “We set a ceiling on fees, waived fees, and introduced a grace period for consumers to make their balances positive before assessing fees. Our fee levels are at the low end of the industry. But we have not finished yet. We will return to zero. “
Although Capital One has lost serious revenue due to its tendency to charge no fees, some experts believe this is financially reasonable.
“Their series of financial services are heavily biased towards credit cards, which are an important source of income in the form of interest rates and fees,” said Ann Martin, director of operations. Credit donkey“By eliminating the overdraft fee for bank products, they will be able to attract more consumers, and then many of them can use the Capital One credit card to set up, thereby making up for any loss of income caused by the overdraft fee.”
Still provides overdraft protection
Capital One customers can still choose overdraft protection. This will prevent their debit card from being rejected or their checks being returned if they spend more than the amount in their checking account.
The difference now is that this service is free. If you are a Capital One customer, please make sure you choose this free service to prevent you from being unable to pay important bills (such as rent or utility bills) due to insufficient funds.
In other words, before Capital One customers are eligible to participate in the program, they must prove that they can manage recurring deposits.
Banks and credit unions that do not charge overdraft fees
These eight financial institutions-banks, credit unions and cash management services-do not charge overdraft fees:
- ally
- Union Credit Union
- Capital One
- improve *
- Axos
- discover
- Fidelity*
- Key vault**
*Fidelity’s account is a cash management account, which is slightly different from traditional checking accounts and is specially designed for those who use Fidelity Investment. Betterment is also a cash management service that provides investment plans and mobile priority checking accounts.
**KeyBank’s overdraft protection for its worry-free account resulted in the transaction being rejected. No fees are charged, but those who refuse to pay rent and utility bills may still cause financial difficulties to pay late fees.
Some large banks, including Wells Fargo, Chase Bank and Bank of America, do provide specific accounts without overdraft fees, but these accounts are lackluster in terms of products and charge monthly maintenance fees.
The future of overdraft fees
In recent years, some banks have not completely eliminated overdraft fees. Instead, they have introduced policies and safeguards to make it more difficult for customers to overdraft and/or to waive overdraft fees more easily.
For example, PNC now has a Low cash mode And online bank Chime provides free overdraft find me, Up to $200. Features such as a 24-hour grace period are becoming a comprehensive standard.
But are these strategies sufficient, especially when other banks completely eliminate these fees? Now that Capital One has achieved this leap, will other banks follow up?
Caleb Reed, founder Dollar budget (And Capital One QuickSilver Cash Rewards credit card holder), he said he thought they would.
“In order to remain competitive and attract new customers, many large banks may follow Capital One and reduce overdraft fees,” he told The Penny Hoarder.
Brad Cummis, owner and principal agent Insurance geek, Agreed that “because of competitive pressure rather than social reasons, other large banks may follow Capital One’s example. Customers may transfer their accounts to banks that offer lower interest rates and do not charge transaction fees such as overdrafts.”
And the Consumer Financial Protection Bureau has Pledge to strengthen scrutiny For banks whose income depends on overdraft fees. The threat of government regulation may prompt other banks to reduce overdraft fees, or at least make it easier for customers to avoid overdraft fees.
Timothy Moore is in charge of the bank account for The Penny Hoarder in his hometown of Cincinnati. He has worked in editing and graphic design at a marketing agency, a global research company, and a major print publication. He covers various other topics including insurance, taxation, retirement and budgeting, and has been working in this field since 2012.
